Urban economics is the use of tools from economics "Economics (economic science)") and urban planning to analyze phenomena in urban areas such as crime, education, public transportation, housing, and local government finances.[1]​ More specifically, it is a branch of microeconomics that studies the urban spatial structure and the location of homes and businesses.

Urban economists study the infrastructure, use of space and local factors of urban centers as areas that create economic synergies. They also analyze the externalities and opportunities of urban centers with respect to their economic activities, laying the foundations for the creation and improvement of urban services.[2]​.

Urban economics focuses on these spatial relationships between individuals and organizations to understand the formation, functioning and development of cities. One origin of the economic analysis of cities is based on the monocentric city model developed in the 1960s by economists William Alonso, Richard Muth and Edwin Mills.[3] Assumptions of monocentricity have weakened over time due to developments in transportation, telecommunications and urban design, allowing greater flexibility in the creation of agglomeration economies.[4]

Urban economics has its roots in the location theories of Harold Hotelling, Johann Heinrich von Thünen, William Alonso, Walter Christaller and August Lösch who laid the foundations for the economic analysis of space.[5] If economics "Economics (economic science)") studies the allocation of resources, urban economics focuses on the allocation of space in urban areas. Urban economics focuses not only on individual business location decisions, but also on cities themselves as centers of economic activity.[6]​.

Some economic phenomena mainly affect urban areas while others are felt in larger geographic areas.[7]​ Economist Arthur O'Sullivan proposes that urban economics can be divided into six areas of study: market forces in the development of cities, land use within cities, urban transportation, urban problems and public policies in cities, housing and local public finances.[6]​.

Stephen J. Redding") in "Quantitative Urban Economics" (2024), reviews quantitative models of urban economics and analyzes their characteristics.[8]​.