Location Theory Flashcards
The Foundation of Planning and other
Economic Theories and
Models
Location Theory
is concerned with the geographic location of economic activities
Location Theory
it addresses the questions of what economic activities are located
where and why.
Location Theory
It rests primarily on the assumption that agents act in their
own self-interest.
Location Theory
Early location theory was concerned with agricultural land use, as
modeled by
von Thunen
industrial location theory
Alfred Weber
seeks to explain the
basic, universal factors that determine
and influence the location of all kinds
of economic activity”
Location theory
“just as there are economic laws which determine the life of the economy, so are there special economic-geographic laws determining the arrangement of towns”
Christaller 1932
location factors for businesses
-land and its attributes
-labor and management
-capital
-materials and power-organization, behavior and change
-market and price
-transportation and freight rates
-agglomeration, linkage and external economies
-public policy, planning, and the state
different types of economic activities
- primary activities
- agriculture, hunting, fishing
- mining, resource extraction
- secondary activities
- manufacturing
- construction
- tertiary activities
- retail
- services
- quaternary activities
- information technology
- media
- research and development
- quinary activities
- producer activities
was an English political economist and
was one of the most influential classical
economists.
David Ricardo (19 April 1772 – 11 September
1823)
known for his Differential Rent Theory
based on fertility, but he also gave “situation” as
a possible cause of rent.
David Ricardo
the difference between the
produce obtained by the employment of two equal
quantities of capital and labor.
Economic Rent
the payment over and above what is necessary
to stay in business
Economic Rent
was a prominent nineteenth century
German economist and landowner,
Johann Heinrich von Thunen (24 June 1783 - 22
September 1850)
first volume of treatise, developed the first serious treatment of
spatial economics, connecting it with the theory of rent first developed by David Ricardo
The Isolated State
(1826)
That is, von Thunen
took the Ricardian notion of rent one step further
by introducing _________ and ________
distance and space
He is
sometimes referred to as the father of location
theorists.
Johann Heinrich von Thunen
Postulates that transport cost depends on the
distance from the market and different kinds of
products. The gain from farming per unit area
(locational rent) decreases with increasing
distance from the market.
Johann Heinrich von Thunen
Coined the term Location rent (land value)
Johann Heinrich von Thunen
economic rent minus the costs
associated with transporting products to market.
Location rent (land value)
gave a predictive model of rural development
around an idealized isolated urban center, imposing several
simplifications to focus on some of the fundamental
processes at work in settlement patterns and rural economic
activity.
Johann Heinrich von Thunen
was
a German economist, sociologist, and
theoretician of a culture whose work was
influential in the development of modern
economic geography.
Alfred Weber (30 July 1868 – 2 May 1958)
He is the author of the
Theory of the Location of Industries, studied
industrial location decisions, and built on von
Thunen’s theory by considering not only the costs
of getting goods to market but also the costs of
transporting material inputs to the manufacturing
plant.
Alfred Weber (30 July 1868 – 2 May 1958)
Consider transportation cost as the direct function of
the item’s weight and distance shipped.
Alfred Weber
He asserted that “all else being equal, manufacturers will
locate their plants either at the market or the source of
the input depending on whether or not the final. The
product gains weight or loses weight in the
manufacturing process”.
Alfred Weber
formulated a theory of industrial location in which
an industry is located where the transportation costs of
raw materials and the final product are at a minimum
(least-cost location).
Alfred Weber
He gave two special cases of
finding the least-cost location
Alfred Weber
The weight of the final product is less than the weight of the raw material going
into making the product.
Weber’s Weight-Losing Case
The final product is heavier than the raw materials that requires transport
Weber’s Weight-Gaining Case
established that firms
producing goods less bulky than the
raw materials used in their
production would settle near the
raw-material source. Firms
producing heavier goods would
settle near their market. The firm
minimizes the weight it has to
transport and, thus, its transport
costs.
Alfred Weber
Extended the von Thunen model to urban land
uses.
William Alonso
His model gives land use, rent, the intensity of land
use, population, and employment as a function of
distance to the CBD of the city as a solution of an
economic equilibrium for the market for space.
William Alonso
He postulated that there is an inverse relationship
between transportation cost and rent such that if
transportation cost is high, then the rent is low.
William Alonso
He developed the “Bid-Price Curve”:
William Alonso
A set of
combinations of land prices and distances among
which the individual is indifferent (i.e. satisfied with
the combination of land price as well as the
distance at some point).
Bid-Price Curve
a line that indicates how much a
person is prepared to pay for a unit of land at varying
distances from the market/ the city center.
Bid-Price Curve
-Wages are higher in the center
cost
-Local demand for labor is more significant than local supply.
cost
-Decentralized shopping centers are being developed following road
improvement and increased car ownership.
cost
-Modern manufacturing industry relies increasingly on heavy road vehicles for
long-distance transportation and incurs lower transport costs on the fringes of
cities than at more central locations.
cost
-Retailing revenue is determined by the size of the shopping catchment area or
hinterland, not just in terms of population but in terms of purchasing power.
revenue
-In the case of offices, the spatial distribution, number, and size of the client
establishments determine revenue.
revenue
-Revenue is thus greatest within the CBD and so are the aggregate costs.
revenue
-To maximize profits, firms need to locate where they can benefit from both the
greatest revenue and the lowest costs.
profitability
-Specialized functions and activities serving the urban market will locate centrally
profitability
-Firms requiring large sites and those attempting to reduce costs of overconcentration
will be attracted to the suburbs.
profitability
-Firms located close together to benefit from complementary will incur lower costs
because of external economies and enjoy higher revenue due to joint demand.
profitability
as _______ largely decides the profitability or utility of goods
and services, it subsequently determines the location of activity and the
spatial structure of the urban area supplying these goods and services.
price mechanism
__________within the CBD are reflected in low
transport costs attracting the greatest demand for commercial sites.
high levels of accessibility
other possible influences
-changes in population, technology, and
transportation
-pressures from redeveloped central areas
-local
and central government policy.
Analyzes the size distribution and firm
composition of cities.
Walter Christaller
A geographical that seeks to explain the
number, size, and location of human
settlements in an urban system.
Walter Christaller
Settlements simply function as ‘central
places’ providing services to surrounding
areas.
Walter Christaller
created the central place theory
Walter Christaller
extends the idea to the
case where there is a hierarchy of cities as well
as a distinction between urban and rural areas.
Central Place Theory
is based on the idea that
different types of firms have different market
areas and that cities are composed of these
firms.
-A market area is the area over which a firm
can underprice its competitors.
-Size depends on the relative production costs
of firms, the cost of transportation, and the level
of demand.
Central Place Theory
is a settlement that provides one or more
services for the population living around it.
Central Place
Simple basic services, i.e. food, and household items (things that
replenish frequently) are said to be low order
Central Place Theory
Specialized services (e.g. computers, universities) are said to be of
a high order.
Central Place Theory
Having a high-order service implies there are low-order
services around it, but not vice versa.
Central Place Theory
Settlements that provide low-order services are said to be loworder
settlements. Settlements that provide high-order services are
said to be high-order settlements.
Central Place Theory
The minimum population size required to profitably maintain a
service is the threshold population.
Central Place Theory
The theory consists of two basic
concepts:
1. Threshold
2. Range
Central Place Theory
the minimum market
needed to bring a firm or city selling
goods and services into existence and
to keep it in business.
Threshold
the average maximum
distance people will travel to purchase
goods and services.
Range
The larger the settlements, the fewer their number
Central Place Theory
The larger a settlement, the farther away a similar size of the
settlement is.
Central Place Theory
The Range increases as the population increases.
Central Place Theory
Improved Weber’s theory by introducing
the demand factor.
August Losch
He assumed that manufacturers are
driven to maximize profit by locating at
the place that maximizes the difference
between revenues and costs.
August Losch
He went on to assert, however, that it is
impossible for a firm to evaluate all
possible points in order to find “the
place of greatest money profit.”
August Losch
That is, “selection of a manufacturing
site from among alternative locations
can be viewed as substituting
expenditures among the various
production factors such that the best site
is chosen.”
Walter Isard
Further developed the isotropic
sphere by introducing the concept of
substitution into a general synthesis of
the works of Von Thunen, Weber, and
Isard.
Walter Isard
Introduced a behavioral matrix in which
the quantity and quality of information
available to a decision maker are
graphed on the y-axis and their ability to
use information is graphed on the x-axis.
Allen Pred
In this matrix, the perfect location
decision would be found at the
intersection of perfect knowledge and
the ability to use that knowledge.
behavioral matrix
created The Impact on Uncertainty of Location
David Smith
Primarily
concerned with adding more complexity to the isotropic sphere by
introducing the uncertainty principle, which effectively dismisses
the assumptions of perfect knowledge of alternatives and
complete information.
The Impact on Uncertainty of Location,
