Urban: Essay

 1.    ANSWER

For a number of reasons, a city's labour demand curve and supply curve can switch. The labour demand curve represents the number of employees that companies desire to hire at any given wage or salary rate under the ceteris paribus assumption. The amount demanded of labour will increase if wages rise.

The demand curve will move to the right as a result of two technological factors. First, technology that supports labour will increase demand for particular types of work. The demand for information technology experts who can handle network software and hardware issues, for instance, has increased as programming tools have been more widely used. The need for knowledgeable people who know how to use technology to increase workplace efficiency will increase as it advances. Any employee who refuses to change with technology will see their demand decline. Additionally, investments in human capital would expand if the demand for competent people increased.

Next, for the labour productivity factor, the cost of manufacturing will reduce if there is an improvement in labour productivity because the employer won't need to purchase technology to supplement labour. As a result, the company will be able to drop pricing as production costs decline. The demand for the product will rise as the price drops. Due to the reduced production costs, the company could grow its output and employ more people. It would cause a rightward shift in the labour demand curve. Agglomeration economies, technical advancements, and rising human capital all contribute to a rise in labour productivity.

Then, labour demand will move if there is increase in output produced. When the quantity demanded for output produced increase, the profitability gained from the output produced would also increase.  More output would be produced. Hence, more labour demanded to maximise the production of output.

Morever, the taxes that have been imposed on businesses would also change the demand for labour. Businesses would shift the burden to consumer if company taxes rose by raising production costs. The quantity produced will decrease as the price of goods rises since the quantity demanded of the product will likewise decrease. Therefore, as a company would not need more workers to create goods that are in low demand, the quantity need for labour will fall.

Nevertheless, other factors will cause the supply curve to alter, such as when residential taxes, such as property taxes, increase without equivalent changes in public services, which would reduce that city's relative attractiveness. The workers need to pay more to be in the city. More proportions of their wage would use to pay the tax. This would make the labour feel unworthy to be in that city compared to the city that has low residential tax.  The migration of workers would happen as workers would move to another city that has low residential tax, so they do not have to pay more.  Hence the supply curve f labour demand would shift to the left.

A city's output of export goods will increase, and its imports of those products will fall if the demand for export products rises. Rightward shift in the demand curve. Therefore, more workers would be required at every wage level.

Next, labour supply curves of a city would shift if there is an increase in amenities, the relative of attractiveness of a city would also increase. Namely, environmental quality. If the city has a good environmental quality, more labour would move to the city since there would be more demand on better air quality.  Hence, the supply of labour in the city would increase. However, if there is any decrease in amenities, the relative of attractiveness of a city would also decrease. Namely, crime. If a higher crime rate happens in the city, labour would feel threatened and not secure to live in the city. Hence, they will move to another place that has low or zero crime rate. Thus, the supply of the labour in that city will decrease and shift the curve.

 Suppose a city improves their residential area and community services, there would be an increase in labour supply of that city. Improvement of residential and public services like the station of public transport, namely LRT is near to the residential area would increase the attractiveness of the city. It would ease the workers to commute to work. Hence, more workers would move to the city to enjoy the amenities. The labour curve would shift to the right since the supply of labour rise.

To conclude, the rise in demand for export goods, rise of public quality services, decrease in tax and increase in labour productivity would increase the labour demand. The curve shifts to the right.  While the supply curve of labour would shift t the right if there is any improvement of amenities and residential public services as well as the decrease in the residential tax.

2.    2. ANSWER

There are a lot of significant factors involved when firms decide where to cluster. The agglomeration economy is the driving force behind this clustering. When a company only works in one industry, localisation makes economic sense. When businesses look beyond limits of industry, this is the municipal economy. A company might be enticed to relocate near another firm in order to build a dense town.

Firstly, to share the same intermediate inputs. It refers to a product that one company creates and that a different company utilises as an input in its manufacturing process. In an effort to share intermediate inputs, firms may be close to one another. This is crucial for businesses or industries that could gain from being close to one another and share similar inputs. They ought to be able to lower production costs and boost specialisation by pooling intermediate inputs, which would subject output to economies of scale. Knowing where these tiny components are made is helpful for businesses as many high-tech items are made up of them.

For example, in skincare products, one firms produced the container of the skincare products and the other company involve in the production of skincare. In skincare industry, the containers made by the firm has been used as inputs by the skincare company to fill the skincare products before it becomes the final goods. Three principles serve as a brief summary of the production technology for "container". First and foremost, it relates to the first axioms in economics: Production is subject to economies of scale. Second, in skincare-container model, the principles would be face time in which it refers to the skin care company's need to be close to the supplier of its containers and cost of renovation in which it refers to the price associated with modifying the container to perfectly match the skin care product. The costs of containers are reduced at cluster skincare companies for two reasons. First, a cluster of several skincare products will create sufficient demand for containers to enable container manufacturers to take advantage of economies of scale, resulting in cheaper container prices. Second, the increased demand for containers will enable container manufacturers to focus on specific types of containers, lowering the cost of skincare manufacturers' modifications. Industry may cluster due to the self-reinforcing effects. As we've seen, clustering helps businesses since it enables them to benefit from input sharing's agglomeration economies. Firms will form business clusters, which will lead to the growth of specialised cities, until agglomeration economies are robust enough to balance the cost of clustering. As stated by the second axiom, self-reinforcing changes generate extreme outcomes.

Secondly, to share the same labour pool. When looking for a location close by, firms can pool employees. This makes it easier for people to discover their areas of expertise and for businesses to employ productive workers for their specific manufacturing items, even though some people may be better suited to work for other businesses. The concept of labour matching is also related to this. Businesses can lose a lot of money by having to train workers who lack the necessary abilities for the position, but in major cities, there is a greater pool of available workers, making it easier to find a connection between employee and employer. For example,             the husband may work at the metal industry that often employ a male as their worker, while his partner may work at textile industry that often relates to the women.

For instance, the workers from unsuccessful firms will transfer to successful firms. The primary distinction between an isolated site and a cluster relates to the labour market rivalry and wage variation. Both the equilibrium wage and the overall demand for labour in the cluster are fixed. Workers can move between the cluster and the isolated site, and under a stable situation, they won't care which place they are in. To relates with “prices adjust to generate locational equilibrium”, which is the first axiom, we should expect more profits gain in that one cluster because when demand is high, the relocation to the cluster lowers wages and enables the business to hire more workers, increasing cluster profit. The other axioms also should be related as well. “Competition generates zero economic profit” happens when any firms will continue to enter the industry until there is no longer any economic profit they can gain, while for the “Production is subject to economies of scale”, every company will employ more than one employee due to the economies of scale in production. This is crucial because, on an economic scale, every company would only recruit one person, who would be perfectly fitted to the business.

Thirdly, the firm can gain many benefits from knowledge spillovers. The businesses will group together so they may learn from one another and, ideally, from educated and skilled labour. Instead of examining these various ideas, it appears that clustering businesses together can be very advantageous. They can exchange labour groups and inputs, better match employee skill sets, and produce a knowledge surplus. All of these factors help to reduce production costs, which helps the company to gain more profit.

Another point to add is the more learning chances in cities is another advantage in the aspect of learning chances. The information and skills employees acquire through formal education, on-the-job training, and social contact are referred to as human capital. Hence, greater pay across the field is a result of urban learning advantages.

Lastly, to joint labour supply. When considering the supply of joint labour, clustering of businesses benefits businesses. This relates to married couples who frequently look for housing based on employment opportunities. Consequently, couples who must take into account each other's needs when looking for employment will be drawn to businesses that combine various sorts of businesses. Diverse firms in one area are advantageous for the firm's workers. Marriage and dual employment are frequently associated with greater levels of education, expanding the pool of potential employees for the company. Larger urban cities were created as a result of the concentration of businesses, which attracted couples looking for a shared labour pool.

To conclude, there are a few reasons why the firms cluster. Firms cluster to share the same intermediate inputs and to share the same labour pool. Besides, the firm can gain many benefits from knowledge spillovers and to joint labour supply.