HOW MANY CITIES?

Hidsal Jamil 135020100111028

OUTLINEIntroduction

The Analysis of Market Areas

Central Place Theory

Urban Giantz: The Puzzle of the Large Primary City

INTRODUCTION

Urban Developme

nt

Regional

Perspective

REGIONAL SYSTEM OF CITIES : Different size and scope

Three section on this chapter1st, How firms in a market-oriented industry carve a region into

individual market areas and why some industries have large market than others?

2nd, uses central place theory to explain how the location patternsof different industries are merged to form a regional system of cities

3rd, explores some possible reasons for the development of giant citiesin developing countries

THE ANALYSIS OF MARKET AREAS (1)Characteristic of The Region:

Common Store Price; technology, input prices

Travel Cost; the monetary and time cost of travel

Shape;the region is rectangular

THE ANALYSIS OF MARKET AREAS (2) Pricing with a Monopolist

FIGURE 5-1 Net Prices of CDs under a Monopoly

30 20 10 0 10 20 30

8

13

18

Net Price ($)

Distance from center of region

(miles)

Travel cost of consumer = ∆ distance from center ∆ net price

.....FIGURE 5-2 Price and Quality with a Single Music Store

Profit

MC

MRD=AR

APC

qm

Pm

$

Quantityof CDs per store

Profit Maximizing output (qm) = MR=MC

THE ANALYSIS OF MARKET AREAS (3) Entry and CompetitionFigure 5-3 Equilibrium Price and Quantity of CDs with Entry

Pe

Cm

qe qmqc

APC

MC

MR D=ARQuantityof CDs per store

$

DECREASING Price & Profit

THE ANALYSIS OF MARKET AREAS (4) Efficiency Trade-OffsFigure 5-4 Trade-Offs with Entry: Production Cost versus Travel Cost

CeCt

qe qmqc

Average Total Cost

APCAverage Travel Cost

qtQuantityof CDs per store

$

THE ANALYSIS OF MARKET AREAS (5) Market Area and Scale EconomicsFigure 5-6 Increase in Scale Economies Increases Output Per Firm

C1

q1Quantityof CDs per store

$

Original Average Total Cost

New Average Total Cost

Original Average Total Production

New Average Total Production

C2

C3

C4

q2 q3 q4

Market Area and Travel Cost

Market Area and PerCapita Demand

Market Area and Population Density

Determinants of The Market

Area:Fixed Demand

(AN ALGEBRA MODEL)

Market Area and Income

Assumptions:1. There are 3 stores in

equilibrium.2. Each sell CDs and each has a

price of $6.3. They have different locations.

An Algebra Model of Determinants of Market Area

Can we set up an algebraic model to determine the market areas of market oriented firms?

Let’s define:d: Per capita demand (number of CDs)e: Population density (per square mile)q: Output of the typical firm (CDs sold per month)

M= q/(d.e) M: Market area of the firm (in square miles) is the territory required for the firm to sell its target quantity, q.(d.e)= Demand density.

An Algebra Model of Determinants of Market Area

An Algebra Model of Determinants of Market AreaFigure 5.5 Equilibrium Market Areas

Tammy’s territory

Bob’s territory

Dick’sterritory

30 20 10 0 10 20 30

6

11

Distance from center of

origin

$ Tammy’s Net Price Bob’s Net Price Dick’s Net Price

Market Area and Travel CostFigure 5.7 Decrease in Travel Cost Increases Ouput Per Firm

C5C6

q5 q6Quantityof CDs per store

Original Average Total Cost

New Average Total Cost

Average Total Production

$

Market Area and Per Capita Demand (d)

How does an increase in per capita demand affect the size of the market are ?

an increase in per capita demand increases the demand of density (the number of CDs sold per square mile, or d

times e

d (d,e) 1If output per store is fixed, each store needs a smaller

market area to exhaust its scale economics 2

Market Area and Population Density (e)

How does an increase in population denstity affect the size of the market are ?

an increase in per capita demand increases the demand of density (the number of CDs sold per square mile, or d

times e

e (d,e) 1If output per store is fixed, each store needs a smaller

market area to exhaust its scale economics 2

Market Area and Income

There are two cities, a poor one and a wealthy one

A CDs is “normal” good (positive income elasticity of demand)

Land is a normal good (positive income elasticity)

Consider a region with the following characteristic :

SCALE ECONOMIES

The Demise of Small Store

Market Areas of Different Industries

PEDAGANG TRADISIONAL BERMAIN DUA PERAN DALAM TRANSAKSI PERDAGANGAN

Huckster

• pedagang adalah tukang jualan yang efektif karena dia tahu fitur dari setiap yang baik di toko dan merupakan sumber terpercaya informasi tentang produknya

Haggler

• pedagang bernegosiasi dengan masing-masing pelanggan atas harga barang. pedagang adalah orang yang menawarkan barang secara efektif karena dia tahu biaya setiap barang di tokonya

Threshold • jangkauan batas minimal kegiatan ekonomi tempat sentral

Range • jangkauan maksimum masyarakat

yang mampu menjangkau tempat sentral

CENTRAL PLACE THEORY

mempertimbangkan daerah dengan tiga produk

konsumen: CD, pizza dan perhiasan. Wilayah ini

memiliki karakteristik sebagai berikut:

Population density

No Shopping externalities

Ubiquitous inputs

Uniform demand

Number of Store

SCALE ECONOMIES

Jewelry

• skala ekonomi permintaan per kapita relatif besar

Compact discs

• Skala ekonomi permintaan per kapita relatif sedang

NUMBER OF STORE

THE CENTRAL PLACE HIERARCHY

SHOPPING EXTERNALITIES

Imperfect Substitutes

Complements

Other Types of Industry

Market-oriented firm

Central Place Theory

Consumers

....

Dua Jenis Perusahaan

Resource-oriented firms

Input-oriented firms

Teori tempat sentral tidak benar-benar berlaku bagi

banyak daerah

Memberikan manfaat tentang sistem regional kota

Mengidentifikasi kekuatan pasar yang menimbulkan

sistem hirarki kota

Menguji sistem kota-kota kecil di daerah pertanian

Central Place Theory and The Real World

• The Role of Trade

• The Effect of Trade Restrictions

• The Role of Infrastructure and Politics

Urban Giants: The Puzzle of the Large Primary City

Perdagangan adalah untuk pemenuhan kebutuhan

Teori yang paling sederhana didasarkan pada

pengamatan skala ekonomi besar

Pembangunan pelabuhan membutuhkan investasi

yang besar di bidang infrastruktur

Satu pelabuhan jauh lebih efisien dari dua atau tiga

pelabuhan

The Role of Trade

• Krugman (1995) membayangkan dua kota P dan S di sebuah negara dan membagi tenaga kerja tetap di dua kota.

• Perusahaan mempekerjakan pekerja dan menjual hasil mereka kepada pekerja dan konsumen.

• Perspektif seorang pekerja memilih kota P atau S sebagai tempat tinggalnya? apa timbal balik bagi pekerja, mengingat bahwa P adalah kota besar (sebagian besar pekerja di P)?

1. kabar buruk: biaya Komuter yang lebih tinggi

2. kabar baik: upah nominal yang lebih tinggi

3. kabar baik: harga bersih barang yang lebih rendah

The Effect of Trade Restricrions

Bagaimana penyediaan infrastruktur transportasi mempengaruhi konsentrasi perkotaan?

Apa peran politik dalam pembangunan kota-kota utama besar?

The Role of Infrastructure and Polotics

The net price of a retail product is the sum of its price and consuumer travel cost

The size of a firm`s market area depend on output per firm, per capita demand, and population density. The market area increases as

a. Output per firm increases.b. Per capita demand decreases.c. Population density decreases.

Summary