logging in or signing up 580 l3 Aric85 Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 110 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: October 04, 2007 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript Why do cities exist?: Why do cities exist? Market Forces Comparative Advantage: 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?Comparative Advantage: Comparative Advantage Output per Labor Hour East West Wheat 1 2 Cloth 1 6Why trade?: Why trade? Wheat Cloth East West 1 2 1 6 Suppose West offers 2 cloth for each wheat: Suppose West offers 2 cloth for each wheat Wheat Cloth East West 1 2 1 6 East specializes in wheat. Wc Wt Wt Ct Trades with West. West trades “small amount” with East. Why? Why trade?: Why trade? We can gain from trade. We can be better off. Will East be as well off as West? Why or why not?Why do cities trade?: 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?Scale Economies in Production: Scale Economies in Production Why don’t we build our own cars? A> There are obviously economies of scale. Two reasons Factor specialization Indivisible inputsFactor specialization: Factor specialization Workers’ skills increase with repetition. Workers spend less time switching from task to task. Volume of cloth 200 400 600 Labor time (hrs. per yd.) 0.25 0.50 Ave. labor timeMarket areas: 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. Slide11: 0.25 1.00 0.50 0.75 1 1 2 3 4 2 3 4 Factory cost Travel cost Cost of homemade cloth 0 Mkt. area of cloth factory Net cost of cloth (hrs.) Miles from factoryNext : Next Klepper, Sections I, II, VII and Table 1 OS – Chapters 2 and 3 You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
580 l3 Aric85 Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 110 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: October 04, 2007 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript Why do cities exist?: Why do cities exist? Market Forces Comparative Advantage: 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?Comparative Advantage: Comparative Advantage Output per Labor Hour East West Wheat 1 2 Cloth 1 6Why trade?: Why trade? Wheat Cloth East West 1 2 1 6 Suppose West offers 2 cloth for each wheat: Suppose West offers 2 cloth for each wheat Wheat Cloth East West 1 2 1 6 East specializes in wheat. Wc Wt Wt Ct Trades with West. West trades “small amount” with East. Why? Why trade?: Why trade? We can gain from trade. We can be better off. Will East be as well off as West? Why or why not?Why do cities trade?: 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?Scale Economies in Production: Scale Economies in Production Why don’t we build our own cars? A> There are obviously economies of scale. Two reasons Factor specialization Indivisible inputsFactor specialization: Factor specialization Workers’ skills increase with repetition. Workers spend less time switching from task to task. Volume of cloth 200 400 600 Labor time (hrs. per yd.) 0.25 0.50 Ave. labor timeMarket areas: 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. Slide11: 0.25 1.00 0.50 0.75 1 1 2 3 4 2 3 4 Factory cost Travel cost Cost of homemade cloth 0 Mkt. area of cloth factory Net cost of cloth (hrs.) Miles from factoryNext : Next Klepper, Sections I, II, VII and Table 1 OS – Chapters 2 and 3