ABSTRACT
This chapter begins by introducing key aspects of economic theory and urban economics. It outlines the major theories and tools in urban economics in order to offer insights how the urban is conceptualized within the discipline. The chapter brings these insights into perspective, defining the urban from the viewpoint of economics. While urban macroeconomics presumes to describe the workings of entire local economies, urban microeconomics embodies both a smaller and a larger scope. Location theory, as it was developed within the field of regional economics, models the decision-making of the parties choosing what sites in an urban area will maximize their "welfare" or wellbeing. Economists operationalized tools for assessing a city's comparative advantage or economic base. Economics examines urban activity and offers principles and insights than can be useful in guiding policy decisions. Policy-makers often cite cost-benefit analysis, which claims to be able to measure the economy- and society-wide benefits and costs of any public-sector activity.
