O'sullivan Urban Economics Final Review

Front 1

Assumptions of the General Equilibrium Model of Property/Structure Taxes

Back 1

1) Total supply of capital (structures) is fixed.

2) Consumers are perfectly mobile between the two cities.

3) There are only two cities in the region.

Front 2

Assumptions of the Tiebout Model

Back 2

1. Municipal choice. A household chooses the municipality (or school district or other local jurisdiction) that provides the ideal level of local public goods. There are enough municipalities to ensure that every household fi nds the perfect jurisdiction.

2. Perfect information and mobility. All citizens have access to all relevant information about the alternative municipalities, and moving is costless.

3. No interjurisdictional spillovers. There are no spillovers (externalities) associated with local public goods: All the benefits from local public goods accrue to citizens within the municipality.

4. No scale economies. T he average cost of production is independent of output.

5. Head taxes. A municipality pays for its public goods with a head tax: If you have a head, you pay the head tax.

Front 3

Consumer Preferences: Indifference Curves

Back 3

Main question: What does the consumer ultimately want?

*The curve essentially shows many ways in which the consumer can reach satisfaction or utility.

*Anything above the indifference curve is a superior combination.

*Anything beneath the indifference curve is an inferior combination.

* Essentially all equivalent combinations among the indifference curve.

*Marginal Rate of Substitution should meet Price Ratio for maximum utility.

Front 4

Innovations in Intracity Transportation

Back 4

Omnibus(1827)

-Elevator (~1850) was responsible for creation of highly dense cities.

Cable cars(1873)

Electric trolley(1886)

Subways(1895)

Trucks(1913)

Front 5

Demise of monocentral cities

Back 5

The invention of the truck essentially decentralized monocentric cities by reducing freight costs dramatically from the suburbs to the city center.

Front 6

Common Interests Developments (CIDS)

Back 6

A type of housing, like condominiums, timeshares, and planned development, which gives the owner undivided rights over the land.

Front 7

Richardo Theory of Rent

Back 7

Rent varies according to the productivity of the land.

Front 8

leapfrogging

Back 8

when developers jump over the next eligible lands for urban expansions, and build farther out there.

Front 9

Floating value

Back 9

Developers purchase land at a high price in anticipation of future public services.

Front 10

The "takings" argument

Back 10

property owners claim absolute rights to their ownings according to the 5th and the 14th Amendment.

Front 11

"Open Space"

Back 11

Parks and roads; The space that suburbanites rush to protect (like in the Town of Red Hook) are most likely private property and not "Open space".

Front 12

An efficient city (according to Gaffney)

Back 12

One that maximizes ease of contact among individuals; one that exploits economics of scale with a high housing density.

Front 13

Monocentric City Model

Back 13

(Office, Manufacturing, Residents, Agriculture)

Office and Manufacturing outbid all other customers in getting land within the center business district.

Front 14

Diversity of Demand for Public Good/ Median Voter Model

Back 14

*The fate of any budget plan succeeding depends on the vote of the median voter.

Front 15

Congestion Externalities and the Congestion Tax

Back 15

*People keep driving until the average private trip cost exceeds demand. A congestion tax attempts to match social marginal costs into private trip costs.

Front 16

Utility

Back 16

Measure of preference over some chosen goods/services.

Front 17

Quality Stepladder Model

Back 17

1) The vertical axis represents housing quality (Low, medium, or high)

2) Households either upgrade or buy a used home.

3) Subsidies, in theory, improves housing for everyone as the house is assumed to trickle down into the hands of lower-income consumers.

Front 18

3 distinctive features of housing

Back 18

1) housing is heterogeneous, or differs from other housing in age, style, decor, size, ect.

2) Housing is durable and will decay over time.

3) Moving from a house is very costly.

Front 19

3 ways housing supply is increased

Back 19

1) Build more new houses

2) Increase maintenance on used houses

3) Upgrade used housing

Front 20

Formula for Consumer Choice Model

Back 20

M = PxX + PyY

Front 21

mortgage interest tax deduction

Back 21

When homeowners can reduce the interest in using, renewing, or repairing a house.

Front 22

Lindahl Model

Back 22

Determines marginal social benefit for all voters; is very similar to the median voter model.

Front 23

3 revenue sources for local government

Back 23

1) intergovernmental grants

2) property taxes

3) charges and general revenue

Front 24

who bears the cost of property taxes?

Back 24

The costs shift from the landowner to the house consumer.

Front 25

Conclusion of Vickrey's "Site Value Taxes and the Optimal Pricing of Public Services"

Back 25

Focus on improving public services within highly-valuable land instead of spreading it out as evenly as possible.