chapter 10 Flashcards
primary activities
Economic activities involving the identification and extraction of the world’s natural resources, such as mining, fishing, forestry, and agriculture.
secondary activities
Economic activities involving the processing, transforming, fabricating, and assembling of raw materials (or secondary products) into finished goods; sometimes referred to as industrial activities; generally include activities such as manufacturing, food processing, and construction.
tertiary activities
Economic activities involving the sale or exchange of goods and services; mostly referred to as service activities; generally include wholesale and retail trade, hospitality and food services, insurance and banking, law, real estate, and various government services.
Quaternary/quinary
professional services, at the top
what is the most important type of firm in a given country’s economy
Corporations, and increasingly transnational corporations (those which operate in more than one country)
ubiquitous goods
Products or raw materials that are found virtually everywhere; examples include electricity or water in most of the more developed world.
important variations aspect of industrial location
Transportation and availability of labour in quality, quantity, and cost
7 factors affecting industrial location
- Location of raw materials
- Availability of energy
- Location of market
- Transportation change
- Availability of labour and capital, quality, quantity and cost
- Internal and external economies, internal vertical and horizontal integration, external locate close to other similar industries
- Executive decision-makers, human and institutional considerations
3 competing theories of industrial location
- Weber’s Least Cost Theory
- Market Area Analysis
- Behavioural Approaches
Weber’s Least-Cost Industrial Location Theory
Normative theory, by the German economist Alfred Weber, aims to prescribe where industrial activities ought to be located, is not true to reality, simplifying assumptions
8 Assumptions of webers least-cost theory
- Some raw materials are ubiquitous
- Most raw materials are localized
- Labour is available only in specific locations
- Markets are fixed locations, not continuous areas
- The cost of transporting raw material, energy, or the finished product is a direct function of weight and distance
- Perfect economic competition exists
- Firms are rational economic operators interested in minimizing costs and maximizing sales.
- Both physical geography (climate and topography) and human geography (cultural and political systems) are uniform
explain how can transportation costs consider distance and weight in the Weber’s Least-Cost Theory
if finished products are higher than the inputs. Locate near raw materials (materials oriented)
If finished products heavier than the inputs. Locate near market (market oriented)
Low labour cost can move production away from resources and market if it covers transport costs
explain how can agglomeration and deglomeration can affect location in the weber’s least-cost theory
Agglomeration (clustered) economies result from firms locating a production facility close to similar industrial plants, allowing firms to share infrastructure (transportation, utilities, and so on) and services
Deglomeration (dispersed) economies are the reverse of agglomeration economies; a firm can benefit from a location away from competitors who might drive up the cost of labour and land.
criticism of the Weber’s Least-Cost Theory
other factors can affect labour that are not taken into account, age, gender, etc… all labour is not the same
market-area analysis
-firms favor profit-maximization over cost-minimization
- locate at largest market and seek spacial monopoly (a single producer sells the entire output of a particular good or service in a given area)
