1. McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Appendix Chapter 7

2. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-2 Central export node for freight Horse-drawn wagons for intracity freight Hub-spoke streetcar system for commuting Central information exchange Model of a Monocentric City

3. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-3

4. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-4 Office firm has steeper bid-rent curve Cost of transporting office output (office workers) is relatively high Cost of transporting manufacturing output (in horse wagons) relatively low Office Sector in Center

5. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-5 Segregation: Employment Area &Residential Area Cost of transporting output high relative to cost of moving workers Low worker transport cost: streetcars High output transport cost: horse carts or office executives Transport suburban workers to center vs. transport suburban output to center Segregated Land Use

6. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-6 Why do the poor occupy land near the center? Why does household income generally increase as we move outward? Income and Location: Introduction

7. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-7 Benefit of moving outward: Housing price decreases at decreasing rate Cost of moving outward: Commuting cost increases Tradeoffs Between Commuting and Housing Costs

8. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-8

9. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-9

10. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-10 New suburban housing Fleeing central-city problems Suburban zoning excludes low-income household Other Explanations of High-Income Suburbs

11. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-11 Paris: Rich mixture of cultural amenities strengthen pull toward center Detroit: Few central cultural opportunities to counteract pull to suburbs Paris vs. Detroit

12. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-12 City is small: one of many in region or nation City is open: costless movement between cities National utility level unaffected by changes in city Population varies, depending on relative attractiveness of city General Equilibrium Model: Introduction

13. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-13 Show interactions between land and labor markets Relevant prices: wage for labor; rent for land Simplifying Assumptions No consumer or input substitution City is rectangular A Interactions Between Land and Labor Markets

14. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-14

15. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-15

16. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-16 Decrease in unit commute cost tilts residential bid-rent curve outward Expansion of the residential territory and increases labor supply The Effects of the Streetcar on the Land Market

17. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-17 Excess supply of labor decreases the wage Decrease in wage decreases quantity of labor supplied Decrease in wage increases the quantity of labor demanded The Effects of the Streetcar on the Labor Market

18. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-18 Decrease in resident income shifts the bid-rent curve shifts downward Decrease in residential bid decreases residential territory and quantity of labor supplied) Decrease in wage (production cost) shifts the business bid- rent curve shifts upward Increase in business bid-rent increases business territory & quantity of labor demanded Effects of Lower Wage on Land Market

19. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-19 Increase in geographical size: CBD expands 50%, along with residential area Labor market: equilibrium workforce larger; wage is lower New Equilibrium

20. ©2009 The McGraw-Hill Companies, All Rights Reserved 7A-20 Increase in rent increases density Labor-supply (residential) density Increases where rent rises Decreases where rent drops Labor-demand (employment) density increases where rent rises Density changes reinforce changes in territory What if Density Varies?