Reference no: EM13231612
Bob and Joe are 2 identical consumers. Bob lives in monocentric city A, and Joe lives in monocentric city B.
The apartments of the 2 of them are identical, with each one being 600 meters large, and with each one being 6 kilometers from the central business district of their respective city.
Assume that Bob and Joe are always in a state of equilibrium.
In city A, the value of an apartment falls in direct proportion to its distance from the business center. Thus an apartment one kilometer away will lose 20 percent of its value and an apt 2 kilometers away will lose 40 percent of its value.
In city B, the value of an apartment also falls the further it is from the business center, yet the fall goes down gradually. For example, an apartment one kilometer away will lose 20 percent of its value and an apt 2 kilometers away will lose only 30 percent of its value.
If Bob and Joe both decide to move to an apartment that's 3 kilometers away from the central business district, what is likely to happen?
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