Скачать презентацию Why do cities exist Market Forces Allen Скачать презентацию Why do cities exist Market Forces Allen

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Why do cities exist? Market Forces © Allen C. Goodman, 2006 Why do cities exist? Market Forces © Allen C. Goodman, 2006

Comparative Advantage • Trading with each other • Suppose that in East, residents can Comparative Advantage • Trading with each other • Suppose that in East, residents can produce 1 bushel of wheat, and 1 bolt of cloth per labor-hour. • In West, residents can produce 2 bushels of wheat, and 6 bolts of cloth per labor-hour. • Can they (do they) trade? © Allen C. Goodman, 2006

Comparative Advantage Output per Labor Hour Wheat East 1 West 2 Cloth 1 6 Comparative Advantage Output per Labor Hour Wheat East 1 West 2 Cloth 1 6 © Allen C. Goodman, 2006

Why trade? East West 2 Wheat 1 6 1 Cloth © Allen C. Goodman, Why trade? East West 2 Wheat 1 6 1 Cloth © Allen C. Goodman, 2006

Suppose West offers 2 cloth for each wheat East West East specializes in wheat. Suppose West offers 2 cloth for each wheat East West East specializes in wheat. Trades with West trades “small amount” with East. Why? 2 Wheat Wt 1 Ct Wc 6 1 Cloth © Allen C. Goodman, 2006 Wt

Why trade? • • We can gain from trade. We can be better off. Why trade? • • We can gain from trade. We can be better off. Will East be as well off as West? Why or why not? © Allen C. Goodman, 2006

Why do cities trade? • There must be an agricultural surplus. Why? • There Why do cities trade? • There must be an agricultural surplus. Why? • There are scale economies in transportation (train terminals, shipping docks, etc. ) • People locate in cities to take advantage of the transportation scale economies. What happens to the price of land? © Allen C. Goodman, 2006

Scale Economies in Production • Why don’t we build our own cars? A> There Scale Economies in Production • Why don’t we build our own cars? A> There are obviously economies of scale. • Two reasons – Factor specialization – Indivisible inputs © Allen C. Goodman, 2006

• Workers’ skills increase with repetition. • Workers spend less time switching from • Workers’ skills increase with repetition. • Workers spend less time switching from task to task. Labor time (hrs. per yd. ) Factor specialization 0. 50 Ave. labor time 0. 25 200 400 600 Volume of cloth © Allen C. Goodman, 2006

Market areas • Why do people buy goods from someone else? A> It’s cheaper, Market areas • Why do people buy goods from someone else? A> It’s cheaper, even if they have to travel to get them. • Two components to the cost of the cloth. – 1. Production cost. – 2. Travel cost to get the cloth. © Allen C. Goodman, 2006

0. 75 0. 50 0. 25 Net cost of cloth (hrs. ) 1. 00 0. 75 0. 50 0. 25 Net cost of cloth (hrs. ) 1. 00 Cost of homemade cloth Travel cost Factory cost 4 3 2 1 0 1 Miles from factory Mkt. area of cloth factory © Allen C. Goodman, 2006 2 3 4

Next • Klepper, Sections I, II, VII and Table 1 • OS – Chapters Next • Klepper, Sections I, II, VII and Table 1 • OS – Chapters 2 and 3 © Allen C. Goodman, 2006