ECON 3500 Lecture 3: ECON3500 Sept 19

• School: University of Guelph
• Department: Economics
• Course: ECON 3500
• Professor: Paul Anglin

Document Summary

Note: the marginal consumer is simply the person who is indifferent between. Formula to compute location of the marginal consumer. Wtp = consumer"s willingness to pay d* = distance travelled by marginal consumer. Solve: wtp = ptk*d* or d* = (wtp p) / k. As p increases, d* decrease (if retailer raises its price, consumers will not travel as long not worth their while) Qd: we need to know information on population density, income, preferences, When wtp = 20, p = 10, k = 2, d* = 5. = 2((wtp-p) / k) * pd * a. Some of the consumers who used to prefer to go to factory 1 (when alternative was doing it themselves) Implications for industrial location: you want to locate the factory where it is profitable. In this case the most profitable location depends on: price of land, size of market area + local population density. In the long-term equilibrium, firms will be @ capacity.