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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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- Fall '08
- Economics, market *Profit maximization, industry Economic model, city center Production, transport cost *Production, Theoretical Analysis of Urban Structure