ECO100Y1 Lecture Notes - Market Power, Opportunity Cost, Economic Equilibrium

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These notes elaborate on a land-market model presented in o"sullivan"s textbook urban economics . The rectangular model is introduced in the section bid-rent curves for the. Manufacturing sector (pages 122-124, 7th edition, or 102-104, 6th edition). In that section"s figure 6-1, we see an equilibrium bid rent curve (= bid rent function, abbreviated here as brf). The brf shows zero-economic-profit land rents for manufacturing firms as a function of distance (x) from a highway. The zero-economic-profit condition is met when firms earn only the profit required to stay in business. The textbook discussion continues in a general equilibrium model of a. Monocentric city (pages 192-194, 7th edition, or 157-160, 6th edition). 7a-3 we again see an equilibrium brf for manufacturing firms now labelled rb. (the b being for businesses that manufacture a product). Figure 7a-3 includes residential land as well as manufacturing and agricultural land, but the discussion in these introductory notes will be limited to manufacturing and agriculture.

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