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Lecture 6

GGR252H5 Lecture Notes - Lecture 6: Demand Curve, Cost Curve, Profit Margin


Department
Geography
Course Code
GGR252H5
Professor
J.Leydon
Lecture
6

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Week 6
Monday February 9th 2015
Spatial Definition of The Market: Demand and Cost Curve, Bid Rent Curve
Spatial Definition of Market
Key issues
oDistance
People will travel certain distances to buy certain goods
Most retail happens in a local
Less then 10km for a particular good
oLevels of Accessibility
How long it takes you to get to the spot
More complicated when you introduce shopping to urban downtown
Also depends on socioeconomic
High income are more mobile
Young and elderly are not that mobile
oLevel of Attraction
People will travel to stores based on there experience of the store
Size of the facility, the larger the more attractive
Demand Curve
Relationship price and number of units/ items sold
The price of the product will determine the level of demand
The higher the less profit
Suggest there is always a demand and that demand never reaches zero
Spatial Demand Curve
Relationship between distance (travel cost), price of unit/item and number sold
It considers the distance, travel cost, and price unit
Travel cost is added to the cost of the unit
You can get to a point of zero demand when including cost of travel (contrast the normal demand curve)
The distance is so great that you wont go to that store therefore the demand is zero
Why is spatial demand curve more important in retail geo – test
Spatial Demand Curve
Consideration

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oType of good – convenience or shopping
Convenience- something your buying t a regular (daily use-weekly use)
Price is low – bread milk sugar
That means if you need to travel a great distance it becomes pointless because transit
(travel) cost will become higher
1 dollar bread, 5 dollar travel time – pointless
Shopping: couch (2000$) then travel is minute to the price of the couch
oTravel time or distance
Distance is easier to measure- absolute measurement
Time is more subjective
35km vs. 28km may be subjective because it could be highway to side streets
Travel time is more significant in an urban than suburban environment
oTravel pattern
We usually don’t go shopping from home
School to the store
Or work to the store
Complicate the way we factor into the travel pattern of an urban core environment
oSettlement density
Urban vs. suburban
In urban: higher density of population and stores
Less distance
A lot of opportunity
In suburban: distance are great
Density of stores is in shopping malls
oRetail competition
Urban vs. suburban
Urban: more competition: independent
Sub: less competition, spatially concentrated in shopping malls
oConsumer characteristics – impact on mobility
Low income, lower levels of mobility – shop locally
Travel to the closest store
High income: greater flexibility
Cost curve
Average cost unit sold
Fixed costs and variable costs
oFixed: rent, utility, wages
oVariable:
Part time employees: makes wages more variable, and low skilled labour, greater flexibility of
schedule because they are younger
Retail margin
o% Of selling price allocated to overheads
oVariable by produce sore market focus
Reallocating
High turnover vs. low turnover
oHigh turn over: grocery
oLow turnover: jewellery therefore high profit margin added
Market threshold/ Market Range
Combination of cost and demand curves
Minimum market side, possible range

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oWhere do cost curves and demand curves intersect
Bid rent curves
The rent a location can command
oLocation – distance from market
Further from the market lower the rent
oAccessibility
Areas that are more accessible are more expensive
The more accessible the location the better you will sell goods therefore the more your rent will be
o
oHelps you understand why certain activities happen at certain areas
oCentral business district
Bid rent curve
Sorting/determining land use
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