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Econ Geog Exam 2
| Question | Answer |
|---|---|
| Von Thunen Model | Situation model that assumes undifferentiated plain: (site characteristics are the same everywhere) and one market, etc. And there would be different |
| Ricardo | focused on site attributes, what land is used for and what purpose, does it have good climate? Best land is used first. Demand up means progressively lower quality land used, until production cost exceeds price. |
| integration (free trade) | Regional specialization and more regional differences |
| what is the GDP avergae you have to be for the EU to help your country? | If you are <75% of the GDP average then you are eligible to receive help from the EU through funding. |
| European Union | North and West is the core, while South and East is the periphery for GDP. |
| Out Migration (Emmigration) and Immigration | Low income in the East means capital investment comes from the West bc of low wages in the East. Out migration can also occur East to West bc more opportunities in the higher GDP West. |
| How to fix declining job issues, especially for de-industrializing regions like the (Rust Belt) | Transfer payments (U.E) benefits, Increase price of regional goods (form subsidies like ethanal mandate), Increase number of employers (government employment, private employers), Increase labor productivity (edu investment, retraining) etc... |
| Resource dependent region | Income inelastic products (agriculture), capitol for labor substitution, declining terms of trade (export price/import price) |
| Recession | Lower demand for labor, or in some cases lower wages but this is usually not the case, wages are usually sticky. Lower wages = lower aggregate spending = lower aggregate demand = lower demand for labor = lower wages. |
| Frictional unemployment | In between jobs, unemployment can never be 0 bc of this. |
| Bigger markets (core) | More differentiated goods - people better off (love of variety). People migrate here for this variety, "real wages" are higher, can put money to consuming goods you actually want. |
| intermediate goods | high GL, differentiated goods (cars) as Ex |
| raw material | low GL, bc it doesnt make sense to export these |
| Grubel Lloyd index | measures the intensity of intra-industry trade (IIT)—simultaneous importing and exporting of similar products within an industry |
| Intra-industry trade | Exchange of products in the same industry. Among more developed countries like varity "Positional", who you are = what you want. Different brands with different associations for different people. |
| Monopolistic competition | Differentiated goods. A car is a differentiated good bc all function the same but not created equal. Ex: Diff size, style, gas mileage, electric, reliability, Each car company has a monopoly on a style of car Ex: Dodge does trucks. |
| Commodity | Gas would be an example, there is no difference except convenience of getting it. Gas price is a matter of a few cents while cars can vary a lot in price. |
| Recent trade | Trade between countries that are alike, countries that are close to each other trade. |
| Traditional trade (Ricardo) | Trade between distant countries bc of differences comparative and absolute advantages, and regional specialization. |
| Demand thresholds | The amount of people you need to stay in business, low threshold = pizza place or gas station. High threshold = opera house. |
| Multiplier effect | One job is going to automatically generate a money flow in the residential area larger than that one job. One guy will get food, a haircut, etc... basically multiplying the money. Paying this job creates a demand for local services. |
| Sticky wages | wages don't often go down very significantly. Labor agreements can limit wage cuts. Legal and Institutional: Minimum wages, right to work laws also contribute. |
| "The World is flat" Thomas Friedman | Evening out effect, convergence, less developed countries catching up. |
| "The World is Spiky" Richard Florida | Innovation, no equilibrium, clustering, continued uneven development |
| Why is Labor not perfectly mobile? | People don't respond like robots and move to higher wage places. You have to factor in moving and social costs. Skills can be transferrable or non-transferrable (can you easily transfer these skills elsewhere?) Ex: accountant Vs. Lobster fisherman. |
| Which workers are more mobile? | Higher skilled and younger workers are more mobile. Young workers are less likely to be attached to an area, lifetime earning potential is another reason, ten more years you are paid more, you accumulate more over lifetime earning in higher wage area. |
| Wage convergence | Wages will adjust and lower the wage differential. One place has higher wages so people move there, which raises the wages in the other city and since there is less demand in the higher wage city wages lower until they even out in both. |
| LQ > 1 | A city with a specialization in this industry (does well) |
| LQ < 1 | No specialization, can even be (underrepresented), city does worse in this area. |
| LQ = 1 | Industry is same as the U.S average (no specialization) |
| Location Quotient (LQ) | Employment #'s by industry. Used to calculate to what extent a region is specializing in certain industries. |
| Comparative advantage Ex: | Factors in opportunity cost, Ex: England produces one unit of wine, so it loses 2 units of cloth = opportunity cost = 2. Portugal has opportunity cost of 1.5 to produce wine so it has an advantage over England. |
| Opportunity cost | If you choose to produce one thing you basically choose to do less of another thing. |
| Transportation cost | If cost is high, then it could negate the benefits of absolute advantage/efficiency advantages to specializing in what your country is good at producing. Ex: even is Portugal is better at both there will still be specialization and advantages in England. |
| Productivity | Higher output with same amount of resources |
| Absolute advantage | If a place is better at making things than they will do so. And trade to get the other things they want |
| David Ricardos Comparative Advantage | An example of trade is laid out which was two countries Portugal and England trading wine and cloth and who is going to do what and why bc they each need both. |
| Automation in manufacturing | substitution of machinery for less workers for same quantity produced. |
| Technological Progress | We can use less resources to produce more, lowering the Isoquant line, for more quantity so what used to be for 10 would be 12. |
| Indifference curve | For households, "utility" how valuable is it for you? |
| Isoquant | Line of constant quantity of something that can be produced. Compares capital and labor and the quantity that can be produced on the line based on the combination. |
| Factors of production | land, labor and capital. |
| Labor | Physical labor and skills, entrepreneurship |
| goods | physical objects |
| Services | intangibles |
| Why is a restaurant a gray area between a good and service? | Because it is a service industry but still gives you a good (food on your plate). |
| Periphery Country | fewer jobs, services, and less investment. Economic dependence on primary sector, weak economics, limited infrastructure. Receives finished products and investments from core. |
| Backwash effects | Negative effects of the cores growth on the periphery. Out-migration of economically active people, outflows of capital, decreasing tax base, firms of the periphery not able to compete with core firms = cores products flood periphery. |
| Spread effects | Positive effects of the core's growth on the periphery. Core is unable to supply all products the core is demanding so supply from the periphery to the core. Firms locate in periphery due to core high rent, overcrowding and confgestion. |
Created by:
JackPitt