TEXTBOOK: John F. MacDonald, Fundamentals of Urban Economics

COURSE DESCRIPTION: A urban economy is a system; i.e., an entity made up of separate parts that interact and adjust. The purpose of this course is to study the parts of a urban economy and how they fit together. One aspect of this is the spatial economics of an urban system. As one economist, Edgar Hoover, puts it, "What is where and why--and so what?" There is an emphasis in urban economics on relating locational decisions to economic models of behavior and market structures.

The pillars of urban economic analysis are:

• Alfred Weber's Theory of Industrial Location: This line of analysis relates locational decisions for plants to sources of raw materials, locations of markets, and transportation costs of raw materials versus finished products.
• Theory of Agglomerations: An agglomeration is a clustering of similar businesses in one area of the city. Some businesses find it advantageous to locate close to their competitors.
• Urban Hierarchies and Central Place Theory: Regional cities are surrounded by a wreath of satellite cities which in turn are surrounded by wreaths of satellite towns, and so on.
• Bid-rent Function Theory: This is the most important analysis for urban economics. It had its origins in the analysis of land use by the 19th century German economist J.H. von Thünen. This analysis relied upon David Ricardo theory of rent. Bid-rent function theory was put into its modern form by William Alonso.
• Economic Base Theory: Some industries supply markets which are outside of the region. These industries are crucial to the local economy and are called the economic base of the region.
• Input-Output Analysis: The relationships of the industries within an economy are most easily analyzed in the format of Leontieff's input-output analysis. This methodology may also be extended to cover interurban relationships.

GRADING: Grades will be based upon two midterm examinations, one final examination, and homework assignments. Each midterm examination will count 20 percent, the comprehensive final examination will count 40 percent and homework will count 20 percent. The examinations are of the multiple choice type except for makeup examinations, which are of the essay type. Makeup examinations are given only on the last day of the final exam period. Homework will included preparing two webpages. Instruction and guidance on preparing the webpage assignments will be given in class.