Consider a monocentric city with crime as described previously in Q2 of Assignment 2. For reference,...

 
    

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Consider a monocentric city with crime as described previously in Q2 of Assignment 2. For reference, remind yourself of the answer to sub-question (a), where you constructed a graph representing probability of crime in the city as a function of distance from the CBD. Now let's add a further piece of information. This city consists of two-income groups "rich" (R) and "poor" (P) with no difference in the cost of commuting for these two groups. Apart from income, here is how they differ, the rich have a very strong aversion to crime (the effect of aversion to crime dominates the effect of aversion to commute- distance) while the poor are moderately averse to crime (the effect of aversion to commute-distance dominates the effect of aversion to crime). Under the above scenario, analyze the spatial behavior of the price per square foot of housing in the city. a) For your analysis, graph the price per square foot of housing for the rich and the poor (PR and pp) as a function of distance to the CBD (x). Explain the economic intuition underlying the behavior of PR and PP. Again, these graphs are not based on precise equations, they merely represent the direction (upward or downward) and slope (relative steepness or flatness) of the curve, while paying special attention to changes that may/may not happen at x = 5. b) Based on your graphs from part (a), what would be the equilibrium spatial distribution of rich and poor residents in this city - i.e. at what locations would the rich and poor residents of this city live with reference to the CBD? Why? c) Bonus sub-question (will be considered for Extra Credit only): Consider we collect data of housing prices in this city. Let's label this hypothetical data of "actual" hous price per square foot as pA. Plot PÅ as a function of distance from CBD (x) on a graph. Explain your graph. Next, the local government decides to clean up crime in this city with the intention of improving lives of the poor residents. The city government succeeds and the city is completely crime-free (same as basic the monocentric city model). Though, it still consists of rich and poor residents (only change from the basic monocentric city model). d) In this crime-free city, re-draw the graphs for pR and pp as a function of distance from CBD (x). How will the equilibrium spatial distribution of rich and poor residents in the city change? Explain your answer. e) Bonus sub-question (will be considered for Extra Credit only): Does this policy really improve the lives of the poor residents? yes, then how? If no, then why not? [Hint: There is no one correct answer here. I am looking for your how you use economic intuition in developing a response.] Consider a monocentric city with crime as described previously in Q2 of Assignment 2. For reference, remind yourself of the answer to sub-question (a), where you constructed a graph representing probability of crime in the city as a function of distance from the CBD. Now let's add a further piece of information. This city consists of two-income groups "rich" (R) and "poor" (P) with no difference in the cost of commuting for these two groups. Apart from income, here is how they differ, the rich have a very strong aversion to crime (the effect of aversion to crime dominates the effect of aversion to commute- distance) while the poor are moderately averse to crime (the effect of aversion to commute-distance dominates the effect of aversion to crime). Under the above scenario, analyze the spatial behavior of the price per square foot of housing in the city. a) For your analysis, graph the price per square foot of housing for the rich and the poor (PR and pp) as a function of distance to the CBD (x). Explain the economic intuition underlying the behavior of PR and PP. Again, these graphs are not based on precise equations, they merely represent the direction (upward or downward) and slope (relative steepness or flatness) of the curve, while paying special attention to changes that may/may not happen at x = 5. b) Based on your graphs from part (a), what would be the equilibrium spatial distribution of rich and poor residents in this city - i.e. at what locations would the rich and poor residents of this city live with reference to the CBD? Why? c) Bonus sub-question (will be considered for Extra Credit only): Consider we collect data of housing prices in this city. Let's label this hypothetical data of "actual" hous price per square foot as pA. Plot PÅ as a function of distance from CBD (x) on a graph. Explain your graph. Next, the local government decides to clean up crime in this city with the intention of improving lives of the poor residents. The city government succeeds and the city is completely crime-free (same as basic the monocentric city model). Though, it still consists of rich and poor residents (only change from the basic monocentric city model). d) In this crime-free city, re-draw the graphs for pR and pp as a function of distance from CBD (x). How will the equilibrium spatial distribution of rich and poor residents in the city change? Explain your answer. e) Bonus sub-question (will be considered for Extra Credit only): Does this policy really improve the lives of the poor residents? yes, then how? If no, then why not? [Hint: There is no one correct answer here. I am looking for your how you use economic intuition in developing a response.]

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a In this scenario we have two income groups the rich R and the poor P with different aversions to crime and commute distance The price per square foot of housing for each income group will be influen... View the full answer