Working,Shopping, and House Rents

The interaction between household demand for goods and for leisure and the supply of labor at various distances from an urban center is investigated for the case where rents are endogenous and adjust to equalize differences in utility produced by the greater time and money costs of the journey to shop and the journey to work. The model is solved for a set of realistic parameter values and this confirms that when rents are equal everywhere the demand for leisure can increase and the supply of labor decrease for households nearer the center, while once rents are endogenous the reverse must be true. For a household at a given location the elasticities of demand for goods and leisure and the elasticity of labor supply are calculated for all the parameters of the model. It is shown that the unavoidable costs of travel to work have strong effects on the rent gradient while the costs of the journey to shop have only weak effects, being offset by the variable frequency of shopping.