If there are two regions that are not equally productive then it can be assumed that one area may be better in producing one or more products than the other region. This is called c omparative advantage.
If one region has a comparative advantage then it is more beneficial to produce that item and trade for another item that another region may have a comparative advantage in producing. To learn more about comparative advantage and trade visit the production possibilities section. Considering constant returns to scale in production once more we can assume that production is subject to economies of scale.
So, if a household were to specialize in one specific thing, then the inputs would be indivisible such as machines and workers could specialize in certain tasks thus leading to a higher productivity and lower costs all around. The last condition for there to be no cities is to have constant returns to scale in exchange. Households can link together and directly trade, however with economies of scale in exchange trading firms will emerge because they ultimately have lower transaction costs.
Therefore, it can be seen that cities exist because it is beneficial to produce what you are good at and use trading firms to lower costs and trade with other cities that may specialize in something else. Because of this trading effect and the fact the firms cluster , larger cities will develop with a central business district. Boston Boston is a good example of the effects of changes in transit technology on city size.
City radius: 6 miles. Last 40 years: Radius is tripled and land area increased ninefold. A rule of thumb: A city should be small enough that a resident can travel from one edge of the city to the city center in an hour. Economic forces behind the development of cities: 1. Comparative advantage 2. Economies of scale in transportation 3. Economies of scale in production Determinants of city size. Chapter 8 A roadmap ahead: So far we have studied how aggregate economic performance is defined and measured.
In the next few chapters we will study the. All rights reserved. Urban Economics Introductory Lecture. Model of a Rural Region n Inputs. Labor and land n Two goods. Wheat and cloth n Equal productivity n No scale economies. The Factor Price Equalization Theorem Assumptions: there are two countries using two factors of production producing two products; competition prevails. Similar presentations. Upload Log in. My presentations Profile Feedback Log out.
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Please wait. Copy to clipboard. Why do cities exist? Goodman, Why do cities exist? Market Forces. About project SlidePlayer Terms of Service. Feedback Privacy Policy Feedback. This suggests that the distribution of population density across the world follows natural laws, and this could play into the ways in which we make decisions about the design of our cities.
If we are aware that the "rank" of each city in a country has a low possibility of changing, how does that change our city planning? The video describes cities as a result of "natural selection," in which humans chose the optimal place to live after a nomadic lifestyle was no longer necessary, and these settlements evolved into our cities.
It suggests that the existence of cities follows the Principle of Least Effort, where people crowded into cities because dense populations are efficient at generating trade and income. If businesses are geographically close to one another, people will flock there in search of employment, which will then lead to businesses moving to these cities in order to be able to hire the best employees. This cyclic situation creates a common labor pool and more efficient trading and collaboration between companies.
In analyzing the possible correlation between wealth and urban population, the richest countries in the world were found to have the highest percentage of their population living in cities. Inversely, the countries with the lowest GDP were also those with some of the lowest rates of urbanization. Although these statistics do not show a perfect correlation, this fact nevertheless suggests that cities exist because they make wealth possible. Cities create efficiency, which in turn creates wealth.
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