Urban economics

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Urban Economics is a branch of Microeconomics that studies the location of households and firms. While other forms of economics do not account for spatial relationships between individuals and organizations, urban economics focuses on these spatial relationships to understand the economic motivations underlying the formation, functioning, and development of cities.

Since its formulation in 1964, William Alonso's model of a city as a disc-shaped Central Business District (CBD) and surrounding residential region has served as a starting point for urban economic analysis. However, due to evolution of the urban spatial form due to changes in technology, modes of communication and transportation, it is generally recognized that the monocentric paradigm may no longer be universally valid. Several explanations for polycentric expansion have been proposed and summarized in models that account for factors such as utility gains from lower average land rents and increasing (or constant returns) due to economies of agglomeration.