1. Hidsal Jamil 135020100111028

2. Introduction
The Analysis of Market Areas
Central Place Theory
Urban Giantz: The Puzzle of
the Large Primary City

3. Urban
Development
Regional
Perspective
REGIONAL SYSTEM OF CITIES : Different size and scope
Three section on this chapter
1st, How firms in a market-oriented industry carve a region into
individual market areas and why some industries have large
market than others?
2nd, uses central place theory to explain how the location patterns
of different industries are merged to form a regional system of
cities
3rd, explores some possible reasons for the development of giant cities
in developing countries

4. Characteristic of The Region:
Common Store Price;
technology, input prices
Travel Cost;
the monetary and time cost of travel
Shape;
the region is rectangular

5.  Pricing with a Monopolist
FIGURE 5-1 Net Prices of CDs under a Monopoly
30 20 10 0 10 20 30
8
13
18
Net Price ($)
Distance from
center of region
(miles)
Travel cost of consumer = ∆ distance from center
∆ net price

6. FIGURE 5-2 Price and Quality with a Single Music Store
Profit
MC
MR
D=AR
APC
qm
Pm
$
Quantityof CDs
per store
Profit Maximizing output (qm) = MR=MC

7.  Entry and Competition
Figure 5-3 Equilibrium Price and Quantity of CDs with Entry
Pe
Cm
qe qm qc
APC
MC
MR D=AR
Quantityof CDs
per store
$
DECREASING Price & Profit

8.  Efficiency Trade-Offs
Figure 5-4 Trade-Offs with Entry: Production Cost versus Travel Cost
Ce
Ct
qe qm qc
Average Total Cost
APC
Average Travel Cost
qt
Quantityof CDs
per store
$

9.  Market Area and Scale Economics
Figure 5-6 Increase in Scale Economies Increases Output Per Firm
C1
q1
Quantityof CDs
per store
$
Original Average Total Cost
New Average Total Cost
Original Average
Total Production
New Average
Total Production
C2
C3
C4
q2 q3 q4

10. Market Area and Travel Cost
Market Area and PerCapita Demand
Market Area and Population Density
Determinants of
The Market Area:
Fixed Demand
(AN ALGEBRA
MODEL)
Market Area and Income

11. Assumptions:
1. There are 3 stores in equilibrium.
2. Each sell CDs and each has a price
of $6.
3. They have different locations.
An Algebra Model of Determinants of Market Area

12.  Can we set up an algebraic model to determine
the market areas of market oriented firms?
 Let’s define:
d: Per capita demand (number of CDs)
e: Population density (per square mile)
q: Output of the typical firm (CDs sold per
month)
M= q/(d.e)
M: Market area of the firm (in square miles) is
the territory required for the firm to sell its
target quantity, q.
(d.e)= Demand density.
An Algebra Model of Determinants of Market Area

13. An Algebra Model of Determinants of Market Area
Figure 5.5 Equilibrium Market Areas
Tammy’s
territory
Bob’s
territory
Dick’s
territory
30 20 10 0 10 20 30
6
11
Distance from
center of origin
$ Tammy’s Net Price Bob’s Net Price Dick’s Net Price

14. Market Area and Travel Cost
Figure 5.7 Decrease in Travel Cost Increases Ouput Per Firm
C5
C6
q5 q6
Quantityof CDs
per store
Original Average Total Cost
New Average Total Cost
Average
Total Production
$

15. Market Area and Per Capita Demand (d)
How does an increase in per capita demand affect
the size of the market are
an increase in per capita demand increases the demand of density
(the number of CDs sold per square mile, or d times e
d (d,e)
If output per store is fixed, each store needs a smaller
market area to exhaust its scale economics

16. Market Area and Population Density (e)
How does an increase in population denstity affect
the size of the market are
an increase in per capita demand increases the demand of density
(the number of CDs sold per square mile, or d times e
e (d,e)
If output per store is fixed, each store needs a smaller
market area to exhaust its scale economics

17. Market Area and Income
There are two cities,
a poor one and a wealthy one
A CDs is “normal” good
(positive income elasticity of demand)
Land is a normal good
(positive income elasticity)
Consider a region with the following characteristic :

18. The Demise of Small
Store
Market Areas of
Different Industries

19. Huckster
• pedagang adalah tukang jualan yang efektif karena dia tahu fitur
dari setiap yang baik di toko dan merupakan sumber terpercaya
informasi tentang produknya
Haggler
• pedagang bernegosiasi dengan masing-masing pelanggan atas
harga barang. pedagang adalah orang yang menawarkan barang
secara efektif karena dia tahu biaya setiap barang di tokonya

20. • jangkauan batas minimal kegiatan
ekonomi tempat sentralThreshold
• jangkauan maksimum masyarakat yang
mampu menjangkau tempat sentralRange

21. mempertimbangkan daerah dengan tiga produk
konsumen: CD, pizza dan perhiasan. Wilayah ini
memiliki karakteristik sebagai berikut:
 Population density
 No Shopping externalities
 Ubiquitous inputs
 Uniform demand
 Number of Store

22. Jewelry
• skala ekonomi
permintaan per
kapita relatif
besar
Compact
discs
• Skala ekonomi
permintaan
per kapita
relatif sedang
pizza
• Skala
ekonomi
permintaan
per kapita
relatif kecil

24. Imperfect
Substitutes
Complements

25. Market-oriented
firm
Central Place
Theory
Consumers

26. Dua Jenis
Perusahaan
Resource-oriented
firms
Input-oriented firms

27.  Teori tempat sentral tidak benar-benar berlaku bagi
banyak daerah
 Memberikan manfaat tentang sistem regional kota
 Mengidentifikasi kekuatan pasar yang menimbulkan
sistem hirarki kota
 Menguji sistem kota-kota kecil di daerah pertanian
Central Place Theory and The Real World

28. • The Role of Trade
• The Effect of Trade Restrictions
• The Role of Infrastructure and
Politics
Urban Giants: The Puzzle of the Large Primary City

29.  Perdagangan adalah untuk pemenuhan kebutuhan
 Teori yang paling sederhana didasarkan pada pengamatan skala ekonomi besar
 Pembangunan pelabuhan membutuhkan investasi yang besar di bidang
infrastruktur
 Satu pelabuhan jauh lebih efisien dari dua atau tiga pelabuhan

30. • Krugman (1995) membayangkan dua kota P dan S di sebuah negara dan membagi tenaga
kerja tetap di dua kota.
• Perusahaan mempekerjakan pekerja dan menjual hasil mereka kepada pekerja dan
konsumen.
• Perspektif seorang pekerja memilih kota P atau S sebagai tempat tinggalnya? apa timbal
balik bagi pekerja, mengingat bahwa P adalah kota besar (sebagian besar pekerja di P)?
1. kabar buruk: biaya Komuter yang lebih tinggi
2. kabar baik: upah nominal yang lebih tinggi
3. kabar baik: harga bersih barang yang lebih rendah
The Effect of Trade Restricrions

31.  Bagaimana penyediaan infrastruktur transportasi mempengaruhi
konsentrasi perkotaan?
 Apa peran politik dalam pembangunan kota-kota utama besar?
The Role of Infrastructure and Polotics

32.  The net price of a retail product is the sum of its price and
consuumer travel cost
 The size of a firm`s market area depend on output per firm, per
capita demand, and population density. The market area increases as
a. Output per firm increases.
b. Per capita demand decreases.
c. Population density decreases.
Summary