ECON 3500 Lecture Notes - Lecture 5: Maximum Wage, Moneysense, Economic Surplus
5 Dec 2017
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Some locations are valuable (not becomes transportation: currently: manufacturing and retailing. 2 types of external returns to scale: localization economies; within industry, same location, urbanization economies; across industries, same location. Note: understanding these mechanisms shows whether an effect is strong or weak in a situation. Note: the maximum wage rate is the intersection of demand curve with the wage rate. Note: the 1/2 before each bracket is probability! = 1/2 of high demand curve surplus + 1/2 of low demand curve surplus. So, this extra profit in the big city comes from the extra flexibility! (75 > 48: apply resources to the stuff people want (and away from what they don"t want) This means, the effect is larger if demand uncertainty is large. Discussion: what factors should amazon consider when it chooses headquarters. Note: this class will take more of a long-run focus! In general, people move to what they consider the best" city.
