Question 2.1 (40 points)

Robotic Cars (Tesla) and Labor Market

Consider a monocentric city where everyone commutes to the city center by automobile. Suppose the introduction of a robot cars (self-driving cars), such as Tesla, decreases the cost of commuting.

a)In the urban land market, how does the introduction of robot cars change the demand of residential land use? Explain. (6 points)

b)In the labor market, how does the changes in the residential land market in part (a) affect the supply of labor? Explain. (6 points)

c)In the urban land market, how does the change in labor supply in part (b) affect the demand of business land? Explain. (6 points)

d)In the labor market, how does the changes in the business land market in part (c) affect the demand of labor? Explain. (6 points)

e)In the labor market equilibrium, how does the introduction of robot cars affect the total employment in the city? Argue why the change in equilibrium wage is ambiguous. (8 points)

f)In the urban land use equilibrium, illustrate the change in business territory and residential territory on a graph. (8 points)