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Utility changes to innovative cityoUtility will equalize between citiesoGains cannot be internalizedoIncome or GDP in a town-∆x.(1/1-m)Income change formulao∆y/∆x = (1/1-m)Income multiplieroMultiplier -If w up, costs up, market reach down, q down, L down-Output effectSubstitute x for yoMuX/MuYo-∆y/∆xoMRS-Like PPFoGiven by equation C = x.Px +y.PxoY = (c/pY) – (px/py) xoAnd Budget Constraint-Combine where MRS = Px/Py-Substitution effectPerfect substitution, except at “arms”-Labor cost is large to total cost-Price elasticity of demand is high -Slope is flat ifPerfect complements-Perfect substitutes at all or nothing side-Slope is vertical if More workers for greater productionoDemand for exports -MPN-Shifts in Labor DemandLabor Demand – Slopes downoSlopes up – counterintuitive?LRAS-Situation when supply curve is verticalWhich ?-Causality of wage and Ls slope upLabor Supply oLand tax – vertical supply curve-Deadweight loss and taxesΔy/Δx = 1/ (1-n)-Employment multiplier EquilibriumoUrban Labor Market-Ch 5Final Study GuideTuesday, December 10, 20138:05 PM Urban Econ lecture notes Page 1Δy/Δx = 1/ (1-n)--Larger the region, the larger the multiplier oAssumes constant input pricesoLimitations to multiplier-Rent/ (1+i)tDraw out time lineNPVoR/i≤ 20, should buy property -NPV/R = 1/iNPV landoMarket Value of Land-Rent = R – non land cost – travel costΔR/ΔX-Slopeecons to scaleBid rentoSame WTP acrossMC and ATCAgricultural land rentsoOptimal housing size from set locationSlope = Phousing/Pother goods-BCMuHousing/MuGoodso-Δy/ΔxoMRS-Indifference CurvesHousing Bid Rent with Consumer substitutionoBid Rent-Many cities now have office and employment outside CBD. Especially true West and SouthoUrban sprawloMonocentric City-Find optimum quantity through majority rule: median person winsTax burden and distribution of costPublic goodoIntegration and SegregationoLocation Choices-Dead weight loss is at Q* priv up, leftPrivate and social cost curve (supply surves)oExternalities – traffic - Urban Econ lecture notes Page 2Dead weight loss is at Q* priv up, leftTax that removes deadweight lossSometimes variable rate is optimalPigon TaxodC*/dXoPartial derivative-Substitute in c*oMultiply by X/c*-Algebra-Elasticities – to find marginal effect of X on C*C* = t(m-p)/(f-nv)ooCurb Parking and Cruising- Urban Econ lecture notes Page 33 things-Income or GDP in a town-Income change formula-Income multiplier-Multiplier -Labor Demand – Slopes down-Urban Labor Market-Ch 5Substitute x for y○2 equations○MRS-Like PPF ○Equation ○And Budget Constraint-Combine where MRS = Px/Py-2 effects-3 reasons-Slope is flat if-2 reasons-Slope is vertical if -2 reasons□Labor Supply -Shifts in Labor Demand-Slopes up – counterintuitive?-Explain -Situation when supply curve is vertical-Equilibrium-Causality of wage and Ls slope up-Good example-Draw land tax-Deadweight loss and taxes-equation-graph-2 things-Limitations to multiplier-NPV-Market Value of Land-Employment multiplier -Equation -NPV land-Draw out time line-Equation for land-What ratio?-Bid Rent-Equation for optimal housing -Final BlanksWednesday, December 11, 201310:28 PM Urban Econ lecture notes Page 4Bid rent-Bid Rent-Rent revenue -Equation -Slope-Agricultural land rents-econs to scale-Same WTP across-Housing Bid Rent with Consumer substitution-Where to supply?-Optimal what?-Slope = -BC-Two ways -MRS-Many cities now have office and employment outside CBD. Especially true West and South-Urban sprawl-Monocentric City-Public good-Location Choices-Indifference Curves-Find optimum quantity through majority rule: median person wins-Integration and Segregation-Private and social cost curve (supply surves)-Externalities – traffic -Tax burden and distribution of cost-Pigon Tax-Dead weight loss is at Q* priv up, left-Tax that removes deadweight loss-Equation -Curb Parking and Cruising-Sometimes variable rate is optimal-dC*/dX-Partial derivative-Substitute in c*-Multiply by X/c*-Algebra--Elasticities – to find marginal effect of X on C*- Urban Econ lecture notes Page

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