econ 135 fall08 lecture4

econ 135 fall08 lecture4 - Urban Economics Lecture 4 Land...

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1 Urban Economics Lecture 4 Land use and equilibrium in cities Definition of a monocentric city: All employment is located at the CBD. (Sometimes we’ll assume that all jobs are in a single tall building.) All commuting is toward the CBD in the morning. The outer edge of the city occurs where market rent equals the rent on agricultural land. Definition of a polycentric city: It has multiple employment centers – ring or point subcenters. Note: another type of city has scattered employment mixed with housing (no name).
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2 Conditions for equilibrium within cities: All firms make zero profits at any location occupied by firms (the CBD). Therefore no firms in the industry want to move within the city. All households having the same tastes and income achieve the same level of utility at any location they occupy within the city. Therefore no household wants to move within the city. If there are two types of households, such as low versus high income, then low income households prefer to live in the low income area and high income households prefer to live in the high income area. supply of labor = demand for labor in the city. The wage rate that equalizes supply and demand for labor is consistent with firms making zero profit. supply = demand for housing at all residential locations in the city. In equilibrium, the pattern of housing prices at varying distances (the market rent function) must be consistent with all households achieving the same utility in every location that they live.
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3 Conditions for equilibrium across cities: Closed versus Open cities When a city is closed , its population level is assumed to be fixed. So there is equilibrium within the city, but not across cities. This is useful as a short-run assumption. If a change occurs such as a reduction in commuting costs, households in the city are
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This note was uploaded on 06/30/2009 for the course ECON 135 taught by Professor Staff during the Spring '08 term at UCSD.

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econ 135 fall08 lecture4 - Urban Economics Lecture 4 Land...

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