Urban Economics

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Urban Economics

• Chapter 03
• Page-01

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Where do cities Develop?

• The location decisions of commercial firms causes
  the development of trading cities

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Transfer Oriented Industrial firm

• Definition
• Transportation cost is the dominant factor in the
  location decision.
• Summation of two cost TC PC DC
• 1. Procurement Cost
• 2. Distribution Cost

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Transfer-Oriented Industrial Firms (TOIF)

• TOIF is defined as one for which transportation
  cost is DOMINANT factor in the location decision.
• Total Transport cost (TTC) PC DC
• PC is the cost of transporting raw materials
  from the INPUT source to the FACTORY.
• DC is the cost of transporting the firms output
  from the FACTORY to the CONSUMER.

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Classic Model of Transfer Oriented Firm (TOF)

• TOF has four Assumptions
• 1. Single Output
• 2. Single Transferable Input
• 3. Fixed Factor Proportions
• 4. Fixed prices

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TOF

• 1. Single Output
• The firm produces a fixed amount of a single
  good. The output is shipped from the factory to a
  market place at point M.

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TOF

• 2. Single Transferable Input
• All inputs are ubiquities except one.

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TOF

• 3. Fixed-Factor Proportions

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TOF

• 4. Fixed Prices

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Resources Oriented Firms (ROF)

• ROF is the function of Weight losing.
• Table (Physical and monetary weight of a ROF)

Output
Physical weight (Ton) 5 3
Transport Cost (Cost Per Ton Per Mile) 1 1
Monetary Weight (Physical Weight Rate) 5 3
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• Total Transport Costs for a ROF

TC PC DC
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ROF

• PC W1 T-1 X
• DC W-0 T-0 (Xm-X)
• These are weight losing activities.

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Other Resource Oriented Activities

• 1. Cotton baling
• 2. Canning
• 3. Skunk deodorizing

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Market Oriented Firms (MOF)

• MOFs are weight gaining .
• For a MOFs , the cost of transporting output is
  relatively high or lagre.

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Resources Oriented Firms (ROF)

• Table 3-2 Physical and Monetary Weights for a
  Market-Oriented firm.

Input Output
Physical weight (Ton) 5 3
Transport Cost (Cost Per Ton Per Mile) 1 1
Monetary Weight (Physical Weight Rate) 5 3
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TTC for a MOFs TTC PC DC
40 30 20 10 0
Market M
Sugar plantation (F)