The previous chapter dealt with a general spatial accounting model which can be applied to many systems. In this chapter the particular application to the location and interaction of activities in the urban or regional space is discussed. It begins by describing the general dynamic structure of the activity system, identifying three main elements: activity allocation and land market, the dynamic relationship between activities and floorspace, and the dynamic relationship between activities and transport. Reference is also made to section 1.5 where general model dynamics were discussed.

General urban–regional dynamics

In the previous chapter, when discussing the issue of abnormal prices, a particular way of representing supply–demand dynamics was proposed when there are short–term restrictions in the capacity of production in particular sectors and regions. If demand for such goods in certain places exceeds capacity, short-term prices rise, generating abnormal profits or rent. Different levels of profit in particular sectors and regions constitute the determining factor in the distribution of investment in a following time period; given a total amount of money available for investment, an investment allocation model can be constructed to distribute money to sectors and regions. This, in turn, will determine increments in the capacity of production for the next time period, thus generating new demand/supply relationships.

In the case of the location and interaction of activities in space, the system can be viewed as people performing activities in particular places in what can be termed the activity system. In such a system, whether at the urban or regional scale, the main restrictions that generate abnormal costs are labour, land/floorspace and transport.