econ 4300 test 1

Wages (W) + Amenities (A) ‐ Housing Costs (H) = Constant (C)

Wages decrease by 500 – 350 = 150

• central business district (at least one)
• dense population relative to outlying area
• ends when land no longer needed for urban prospects

All else equal

when there is no incentive to relocate to a new area or "indefference" between locations

we are always moving towards spatial equilibrium, while we may never be IN a spatial equilibrium

• Policy Changes
• Estimating the value of amenities

because comparitive advantages separates people's opportunity costs

• they allow people to specialize and trade
• economies of scale

average costs fall as output increases

• old Western cities
• specializaton and trade cities

• Economies of Scale in Transportation cities
• Erie Canal cities

• Economies of Scale in Production
• Detroit
• Milwaukee

as consumption increases, average cost decreases

• Ports
• Rivers
• Lakes

a transfer city from a waterway to a rail or roadway of increasing elevation

Iron ore is the natural resource to make the finished product of steel

price of input/cost per mile

• urbanization- indifferent firms cluster
• localization- similar firms cluster

• to save on shipping costs
• access for face to face meetings
• modification costs- save on changing product

• more workers=more variety of worker skills
• better match for skills you need
• don't have to train as much

knowledge spillover

selection problem- those willing to move will earn higher wages for other reasons

The effects of clustering- a huge new factory increases the productivity of nearby firms by labor pooling and knowledge spillover effects

• input sharing
• labor pooling
• knowledge spillovers
• servicing corporate headquarters
• joint labor supply decisions

power couples and singles

• Price Cutting Effect-more competition
• Market-Size Effect-the chances consumers find what they want increases

• Wal-Mart has a huge, positive effect on employment around it
• However, Basker picked places where employment would have increases without a Wal-Mart (selection effect)

David Neumark discovered that for every job at Wal-Mart, 1.4 lost jobs at other retailers and wages decreased by 1.5%

What people are willing to pay to use land for a given time period

• Site specific amenities-only exist at a given location (ex. Six Flags)
• Amentites we travel to (Ex. Kroger)

• Freight-oriented firms needed to move output for national export
• Office firms rely on face to face inteaction with many other firms

Firms are willing to pay for land after their costs have been subtracted from their revenues, including transport costs

WTP=Revenue-Product cost-Transport Cost