The Bid-Price Curve and Market Equilibrium

Abstract

The empirical studies in the preceding chapter were, in a sense, a digression from the main thread of the argument; however, they demonstrated the validity of the theories in Chapters 3 and 4 of the demand for, and the supply of, space. In this chapter we bring together these theories to show how demand and supply are equated when the market is in equilibrium. Since space is supplied at every location in the city there is no single market price. We cannot therefore take over, unchanged, the analysis of market equilibrium which is customary in standard microeconomic theory where goods are assumed either to have no locational dimension or to be brought to, and sold at, a market at a particular location. In the case of habitable space in the city the market has to be thought of as a number of interconnected submarkets, each at a different distance from the city centre and each having a different equilibrium price and a different equilibrium quantity traded.