Final Study Guide Tuesday December 10 2013 8 05 PM o o o o o Ch 5 Income or GDP in a town Utility changes to innovative city Utility will equalize between cities Gains cannot be internalized Multiplier Income change formula x 1 1 m Income multiplier y x 1 1 m Urban Labor Market o Labor Demand Slopes down Output effect If w up costs up market reach down q down L down Substitution effect MRS o o o Substitute x for y MuX MuY y x And Budget Constraint o o o Like PPF Given by equation C x Px y Px Y c pY px py x Combine where MRS Px Py Slope is flat if Perfect substitution except at arms Labor cost is large to total cost Price elasticity of demand is high Slope is vertical if Perfect complements Perfect substitutes at all or nothing side Shifts in Labor Demand Demand for exports More workers for greater production Labor Supply o o MPN o Equilibrium Slopes up counterintuitive Situation when supply curve is vertical Causality of wage and Ls slope up LRAS Which Deadweight loss and taxes Land tax vertical supply curve Employment multiplier y x 1 1 n Urban Econ lecture notes Page 1 y x 1 1 n Limitations to multiplier o o Larger the region the larger the multiplier Assumes constant input prices Market Value of Land o NPV o NPV land Rent 1 i t Draw out time line R i NPV R 1 i Bid Rent o Bid rent 20 should buy property Rent R non land cost travel cost Slope R X econs to scale o Agricultural land rents Same WTP across MC and ATC o Housing Bid Rent with Consumer substitution Optimal housing size from set location BC Slope Phousing Pother goods Indifference Curves MRS o o MuHousing MuGoods y x Monocentric City Location Choices Public good o o o o o Many cities now have office and employment outside CBD Especially true West and South Urban sprawl Find optimum quantity through majority rule median person wins Tax burden and distribution of cost Integration and Segregation Externalities traffic Private and social cost curve supply surves Dead weight loss is at Q priv up left Urban Econ lecture notes Page 2 Pigon Tax Dead weight loss is at Q priv up left Tax that removes deadweight loss Sometimes variable rate is optimal Curb Parking and Cruising C t m p f nv Elasticities to find marginal effect of X on C Partial derivative dC dX Multiply by X c o Substitute in c o Algebra o o o Urban Econ lecture notes Page 3 Final Blanks Wednesday December 11 2013 10 28 PM Ch 5 Income or GDP in a town 3 things Multiplier Income change formula Income multiplier Urban Labor Market Labor Demand Slopes down 2 effects MRS Substitute x for y 2 equations And Budget Constraint Like PPF Equation Combine where MRS Px Py Slope is flat if Slope is vertical if 3 reasons 2 reasons Shifts in Labor Demand Labor Supply 2 reasons Slopes up counterintuitive Situation when supply curve is vertical Explain Causality of wage and Ls slope up Equilibrium Deadweight loss and taxes Employment multiplier Good example Draw land tax equation graph Limitations to multiplier 2 things Market Value of Land NPV Equation Draw out time line Equation for land Equation for optimal housing NPV land Bid Rent What ratio Urban Econ lecture notes Page 4 Many cities now have office and employment outside CBD Especially true West and South Urban sprawl Equation Agricultural land rents Housing Bid Rent with Consumer substitution Slope MRS Two ways Bid Rent Bid rent Rent revenue Slope econs to scale Same WTP across Where to supply Optimal what BC Indifference Curves Monocentric City Location Choices Public good Find optimum quantity through majority rule median person wins Tax burden and distribution of cost Integration and Segregation Externalities traffic Private and social cost curve supply surves Dead weight loss is at Q priv up left Pigon Tax Tax that removes deadweight loss Sometimes variable rate is optimal Curb Parking and Cruising Equation Elasticities to find marginal effect of X on C Partial derivative dC dX Multiply by X c Substitute in c Algebra Urban Econ lecture notes Page 5