Heli-Segways for Workers Consider a region with 6 million workers and two cities

Question

Heli-Segways for Workers Consider a region with 6 million workers and two cities (A and B), each with an initial workforce of 3 million (the utility-maximizing workforce). Suppose the heli-segway (a flying personal transporter) replaces the automobile, cutting commuting cost and increasing the utlity- maximizing urban workforce per city to 5 million. The positively sloped part of the new utility curve is steeper than the negatively sloped part. a. Show the effect of the heli-segway on the urban utility curve in the typical city b. A workforce of 3 million [is, isn't a stable equilibrium because c. Using the new utility curves, show the changes in the workforces of two cities, one that grows and one that shrinks. Label the initial point i and indicate the directions of the changes with arrows d. The new equilibrium number of cities is __ and each city has a population of

Explanation / Answer

Answer:

Part a

The effect of Heli Segway on the urban utility curve in one city would be increase in the workforce from 3 mn to 5 mn and then the utility would increase from the previous situations, which were limited to 3 mn.

Part b

A workforce of 3 Million is not a stable equilibrium because the positively sloped part of the new utility curve is steeper than the negatively sloped part of the curve after automation and workforce increased to 5mn. Previous curve was not as steep as the new one hence showing a not a stable equilibrium.

Part c

We cannot draw diagrams over here. Hence to show the changes due to increase in the workforce the utility will increase compared to the previous state where the utility was constrained due to less number of workforce.

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