5. Consider a monocentric model with fixed housing unit h and the utility of residents u=c,where c is the consumption of the composite goods. The budget constraint of each residentliving at distance d from the CBD is c + ph = w-dt, where w is wage, p is housing rental rate,t is the unit commuting cost in distance. The city is open and free migration in and out. Theexternal utility they obtain out of the city is ū= 10. The rental rate on agricultural land is pA.(a) Illustrate why the consumption of residents living in all parts of the city will beequalized.(b) Derive the housing rental rate (p) as a function of d, distance from the CBD, What isthe slope? Draw a figure with p at the y-axis and d at the x axis.(c) Discuss how the boundary of the city is determined in this model, how would theboundary of the city respond to wage w and commuting cost t?

The objective of the question is to understand the monocentric city model and how it affects the…

Answered: 5. Consider a monocentric model with…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 1: Closed CityAssumptions of the model:The city is a circle with a radius that extends from the point 0 to the bound- ary of the city x ̄. There is a fixed population N, which we for now consider exogenous or fixed. All workers receive and income y and face a commuting cost t per mile that they drive. Workers have preferences over a compos- ite consumption good c with their utility function given by U(c) = c. All households demand a fixed quantity of land q, which is exogenously deter- mined and carries the rent r(x) per unit of land at location x. The rent at the boundary of the city is equivalent to the agricultural rent ra, that is r(x ̄) = ra All rental income is assumed to paid to absentee landlords who live outside the city. The household budget constraint is then given by y − tx = ri(x)q + c a) Make a list of your exogenous and endogenous variables. b) Solve for the urban bid-rent function.c) Solve for the remaining endogenous variables
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What is NOT a key feature of gentrification? a_A return of wealthier classes to inner-city areas b_A reinvestment in dilapidated or undervalued neighborhoods or blocks c_An increase in rent and housing prices in the neighborhood d_Displacement of lower-class groups in the neighborhood e_Promotion of public trust as a resource
suppose the government of a desert community wants to punish excessive water useage, where "excessive" is defined as any usage greater than 100 gallons/week. to do this, the government paces a flat $100 income tax on anyone who consumes more than 100 gallons/week of water in any given week (so this tax could theoretically be levied 52 times per year). people who use less than 100 gallons of water each week will not face this $100 special tax. For these problems, consider the decisions between water consumption, X(sub)w and consumption of a composite good, X(sub)c, where P(sub)w =$2/gallon and the composite good's price is numeraire. suppose michael lives in this desert community and has a weekly income of $1000. 1. graphing michels budget contraint over (X(sub)w , X(sub)c) bundles, what is the slope of his budget conraint for bundles containing MORE than 100 gallons of water? 2. What is the slope of michaels budget constraint at the point (X(sub)w, X(sub)c)=(100,750)? 3. what is the…
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5. Consider a monocentric model with fixed housing unit h and the utility of residents u=c, where c is the consumption of the composite goods. The budget constraint of each resident living at distance d from the CBD is c + ph = w-dt, where w is wage, p is housing rental rate, t is the unit commuting cost in distance. The city is open and free migration in and out. The external utility they obtain out of the city is ū= 10. The rental rate on agricultural land is pA. (a) Illustrate why the consumption of residents living in all parts of the city will be equalized. (b) Derive the housing rental rate (p) as a function of d, distance from the CBD, What is the slope? Draw a figure with p at the y-axis and d at the x axis. (c) Discuss how the boundary of the city is determined in this model, how would the boundary of the city respond to wage w and commuting cost t?
Utility. Suppose we have two cities, 1 and 2. Assume every individual has the same utility function given by: u(w;,r;) = 4 * WJ - 0.75 * r; where j = 1 or j = 2. Furthermore, for all parts of the problem assume the total population is fixed at 1, 000 and wages in each city are given by: W1 = 15W2 = 12 (a) What is the utility from each choice if r1 = 20 and 1'2 = 15. Is this an equilibrium? How do you know? (b) For the rest of the problem you can now assume that rents are increasing in the population of each city. Specifically, assume r1(L1) = 4 * L1 and T2 (L2) = 8 * L2. Compute the equilibrium population of each city equilibrium rents.
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