ons (Levy, 1990, pp. 4-8). The initial assumption upon which location theory was based was that entrepreneurs attempted to maximize profits in the context of prices fixed by the market, where they possessed perfect information concerning the relative costs associated with all potential locations. Thus, early location theory explained all locational decisions in the context of differences between potential locations with respect to production and transportation costs. This conceptual approach also was applied to location decisions by public entities.
While urban economics is concerned with location patterns of households, firms, and other entities which locate in densely developed areas, the body of knowledge also encompasses such considerations as how the patterns of location evolve and change, how the patterns of location are affected by government expenditures, taxes, and regulations, and how the patterns of location affect the economic performance of both firms and households (Levy, pp. 4-8). The composition of the population of any given community is a significant factor in the determination of the mix of the facilities provided in that community. The location of public housing projects is a part of the facility mix decision. Government may develop a specific mix of publicly provided goods with an intention of attracting and manipulating a population mix for an area. Road improvements, as an example, may make it possible for more people to locate in a specific area, because access between that area and major job location centers is facilitated by the improved roads. By financing road improvements, as opposed to mass transit improvements, a government may promote the location in an area of higher income families, who are able to afford the higher transportation costs involved, and who would not likely object to an additional tax to provide for improved roads.
Rational development begins with a planning process, wit...