Consider a region with 2 export products (saxophones and soccer balls) and 2 loc

Question

Consider a region with 2 export products (saxophones and soccer balls) and 2 local goods (haircuts and music concerts). The production of each export good is subject to localization economies, so each city specializes in one export good. According to the urban economist Grace Slick i?If my two assumptions (one for export products and one for local goods) are correct, all the cities in the regions will be the same sizei?. Assume that Slicki?s logic is correct. List her assumptions and explain why together they imply the regioni?s cities will have the same size.

Explanation / Answer

Grace's assumptions about the regions having the same size might be due to following considerations:

1. When the supply and the demand of the local economy is stabilized, it implies that the economy is doing well and it has some amount in surplus. Now when the exports are done in the same economy it will add to the load balancing and it will add to the existing stability of the market.

2. Exports will bring in foreign currency into market and the imports will regulate the supply and demand. Hence her assumption might deem fit to the scenario.

3. By understanding the local unemployment ratio she will be able to judge the amount of opportunities generated from the exports and imports, this will naturally lead to the economic growth and equilibrium.

4. Reports from various regions stating the export range and the import range should be depicting the scenario that is prevalent in all the cities and this could have been observed by size of all the regions which must be same.

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