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GEOG 2230 (2)
Chapter 1

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University of Guelph
GEOG 2230
Roberta Hawkins

Chapter 1 - Markets in Place and Space • Figure I.3 on pg xxii - value chains in Aggregate Sectoral Perspective 1. The market is often described as an 'invisible hand': a natural mechanism powered by the pursuit of individual self-interest and disciplined only by competition 2. Neoclassical economics - Refers to mainstream economics developed in the 19th century as a formal, abstract interpretation of economic behaviour that is rational, self-interested, and perfectly informed 3. Instituions - Formal and informal, economic and non-economic constraints on human behaviour, including everything from markets themselves and business organizations to governments and social movements to habits of thought, routines and 'rules of the game' 4. markets are embedded in social relations 5. Place - A particular territory, locality, region or neighbourhood where people live and work 6. Space - The area over which people and activities are linked; regions, nations, continents, or event eh glove itself could all be defined as spaces, depending on the context 7. market economies depend on exchange and the setting of prices between sellers and buyers 8. Market Economies - Societies that rely on market institutions to organize the production of goods and service for consumption 9. Markets - Institutions for the price-based exchange of goods and services 10. Embedded - a term used to underline the degree to which economic and non- economic factors or processes are integrated with one another 11. Market Failure - A term used to refer to situations in which markets do not work properly (e.g., when market behaviour results in unacceptable environmental or social consequences). 12. Three main types of markets 0 Open market 0 A market made up of numerous small, independent buyers and sellers 1 Relational market 0 A type of market characterized by repeated transactions between a core firm and a stable set of suppliers; information exchange and collaboration are often important features in such relationships 2 Administered market 0 A market that is internal to a particular (usually large) organization; also referred to as hierarchical, integrated, or internal 13. Transaction Costs - The costs (to buyers and sellers alike) of using a particular market' theses costs included 'uncertainties' 14. Countervailing Power - The power that major economic and non-economic institutions use to constrain the power of 'big business' Perfect Competition • Perfect competition - The ideal market model in neoclassical economic theory, in which fair competition between multiple buyers and sellers would ensure self- regulation • The standard view of competition assumes a market that is perfect pro ideal in three respects ◦ Competition Large numbers of suppliers bring goods to he market and large numbers of costumers purchase them ◦ Fairness transactions voluntary; consumers and suppliers independent of one another; all consumers are more or less equal, and unable to arbitrarily influence prices ◦ Self-regulation Homo economicus - 'Economic man', the personification of rationality in neoclassical economic; the ideal economic actor, in possession of all the information necessary for decision-making, who would invariably seek to maximize profits and minimize costs • perfect market model, prices are set through the interaction demand and supply • demand curve (schedule) - A graph showing the quantity of products that consumers are able and willing to buy at different prices • supply curve (schedule) - A graph showing the quantity of products that suppliers are able and willing to supply at different prices • this model fails to take into account the location where the exchange takes place • certeris paribus - Latin for 'all other things being equal'; a standard phrase in attract neoclassical theorizing, used to rule our extraneous factors that could affect the outcome of a prediction Demand for a Good over Space a. Central Place Theory - A theory of how markets both evolve in response to the distribution of consumers and how markets organize economic activity over space b. Range (of a good or service) - The distance that consumers are willing to travel to buy a particular good or service c. Threshold population - The minimum population required to ensure that demand for a good is sufficient to make its production economically viable d. In perfectly competitive markets, the most efficient distribution of services is geometrically defined by hexagonal market areas e. The central place Hierachy 0 Metropolitan area / central business district 1 city / suburban scale 2 town / Neighbourhood 3 village / Local centre 4 hamlet / Corner store Market Coordination • Two basic types of transactions costs ◦ Coordination cost 0 expenses associated with the administration and organization of market participants ◦ opportunism costs 0 when one participant in a transaction takes advantage of another participant in some way • moral hazard - A form of opportunism where people take risks they would otherwise avoid because they are insured against losses; such changes in behaviour are usually detrimental to the interest of the insurer • markets must also be a place for information exchange Three Types of Market Exchange • Open Markets
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