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Unformatted text preview: production and exchange that seem to defy the natural order. 3 condition to be a city: Agricultural Surplus: people outside cities must produce enough food to feed themselves and city dwellers. Urban Production: city dwellers must produce somethinggoods or services to exchange for food grown by rural workers. Transportation for exchange: there must be an efficient transportation system to facilitate the exchange of food and urban products. 5 Axioms of Urban Economics 1) Prices Adjust to Achieve Location Equilibrium: equilibrium occurs when no one has an incentive to move. (Beach house vs. house on a noisy highway) Location equilibrium requires a higher price for the beach house. To eliminate the incentive to move, the price of the beach house must be high enough to fully compensate for the better environment. 2) Externalities...
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This note was uploaded on 10/23/2009 for the course ECON 420 taught by Professor Staff during the Spring '08 term at Wisconsin.
- Spring '08