ECON 366 Notes (09.17.2008)

ECON 366 Notes (09.17.2008) - be higher in the city center...

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Econ 366 Notes 9/17/2008 Chapter 6: Theoretical Analysis of Urban Structure *Introduction Idea: production is concentrated in a central area - Also means that capital and labor is used more intensively in the central area - So we have small amounts of land (relatively) *Urban area with a single industry Economic model of production takes into account location factor - We assume a region has a comparative advantage in producing some good/service o But, there is a central point in that region where goods must be brought to From there, the good must be exported or distributed There is transportation cost The closer, the lower the transport cost *Production conditions Big assumption: commodity is produced with land and capital (no labor) - Sounds counterintuitive o What we’re trying to do is to see/check the situation in which the rents would
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Unformatted text preview: be higher in the city center Production function has constant returns to scale Competitive output market Competitive input market *Profit maximization R(u) = MPL of P – MPLtu = R(u) = c – bu *If input substitution is possible If we use the same capital and same land, we are not using the best method of production If we moved closer but used less land and substituted capital for land, then optimal will be cheaper As opposed to rent line that is linear, it’s more a rent curve (convex) Additional assumptions-You do not move your production to a distant location if a nearer location is available for production Econ 366 Notes 9/17/2008 o L(u) = (radians)(u) Land area o Production function Q = F(K, Land) o Demand (local demand, export demand) = Supply...
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