d) Explain the two reasons the text gives for why residential density increases as we approach employment areas such as the central business district (CBD)? (4).

Some local products are available in all cities, large and small. If the per-capita demand for a product is large relative to the scale economies associated with pro- ducing it, even a small city will generate sufficient demand to support at least one firm. For example, it takes just a few thousand people to support a barber, so even a small city will have at least one barber. Similarly, a pizzeria can be supported by a few thousand people, so even a small city will have pizzerias and pizza workers. Of course, a larger city has more hair to cut and more people to feed, so it will have more barbers and pizza tossers. In fact, we expect the number of barbers and pizza tossers to increase proportionately with city size.

Some local products are available only in large cities. If the per-capita demand for a product is low relative to the scale economies in production, it will take a large city to generate enough demand to support a firm. For example, the per-capita demand for opera is relatively small, so it may take a million people to support an opera company. As a result, we will find opera companies in large cities but not small ones. Similarly, the per-capita demand for brain surgery is low relative to the scale economies in production, so brain surgeons operate in large cities.

Larger cities have a wider variety of consumer products. In a large city, con- sumers can get everything available in small cities (pizzas and haircuts) as well as products not available in small cities (opera and brain surgery). In fact, people in small cities travel to large cities to buy products that are not available locally. In contrast, consumers in large cities can buy almost anything they want locally so there is little reason to travel to smaller cities.