LESSON 3 LOCATION THEORY

Location Theory

Study of economic activity geographic placement.

Self-Interest Assumption

Agents act to maximize profits or utility.

Transport Costs

Primary factor influencing location decisions.

Von Thunen Model

Early theory on agricultural land use.

Alfred Weber

Developed industrial location theory.

Behavioral Geography

Focus on real individuals in location choices.

Urban Spatial Structure

Economic factors shape urban form and layout.

Technological Change

Location influences innovation and economic growth.

Business Location Choices

Reasons for businesses choosing specific locations.

David Ricardo

Influential classical economist on labor value.

Principles of Political Economy and Taxation

Ricardo's work on economics and taxation.

Differential Rent Theory

Ricardo's theory based on land fertility.

Economic Rent

Excess payment over necessary business costs.

Johann Heinrich von Thunen

Pioneer of spatial economics and location theory.

Isolated State

Thunen's treatise on spatial economics.

Locational Rent

Economic rent minus transport costs.

Transport Cost Model

Costs depend on distance and product type.

L = Y(P - C) - YDF

Formula for calculating locational rent.

Yield (Y)

Amount produced per area (t/km²).

Market Price (P)

Selling price of the crop (DM/t).

Production Cost (C)

Cost to produce crop (DM/t).

Distance (D)

Distance from market (km).

Transport Cost (F)

Cost per distance unit (DM/t/km).

Agricultural Land Model

Predictive model of rural development.

Location Rent

Value of land after transport costs deducted.

Economic Activities

Various actions that generate economic value.

Localized Materials

Resources found in specific geographic areas.

Amenities

Features that enhance location desirability.

Urban Center

Focal point for economic activities in cities.

Isolated State

A centrally located city surrounded by wilderness.

Flat Land

Terrain with no rivers or mountains present.

Consistent Soil Quality

Uniform agricultural conditions across the land.

Oxcart Transportation

Farmers transport goods directly to the city.

Rational Farmer Behavior

Farmers aim to maximize profits in decisions.

Johann Heinrich von Thunen

Economist known for agricultural location theory.

Cultivation Distance

Crop viability depends on proximity to the city.

Transport Cost

Costs increase with distance and land value.

Alfred Weber

Economist focused on industrial location theory.

Theory of Location of Industries

Weber's model analyzing industrial site decisions.

Material Input Costs

Costs of transporting raw materials to production.

Weight-Losing Case

Final product weighs less than raw materials.

Least-Cost Location

Site minimizing transportation costs for goods.

Raw Materials Location

Site where raw materials are sourced.

Production Site

Location for manufacturing final goods.

Consumption Center

Market location for selling final products.

Transportation Cost Function

Cost depends on weight and shipping distance.

Market Location

Site where final products are sold.

Bid-Price Curve

Shows land price willingness at varying distances.

Inverse Relationship

High transport costs lead to low land rent.

Economic Equilibrium

Balance of land use and market space.

Urban Land Use Model

Alonso's extension of von Thunen's agricultural model.

Land Rent Intensity

Rent varies with distance from city center.

Population Density

Concentration of people based on land use.

Employment Distribution

Job availability related to distance from CBD.

Land Price Decline

Prices decrease as distance from CBD increases.

Transportation Cost Minimization

Firms locate to reduce transport expenses.

Heavier Goods Production

Firms settle near markets for bulky products.

Cost

Expenses associated with land and labor proximity.

CBD

Central Business District; high revenue area.

Commuting Costs

Expenses offset by higher wages for accessibility.

Junctions

Locations favored for supplier and market access.

Decentralized Shopping Centers

Retail hubs developed due to road improvements.

Heavy Road Vehicles

Transport used for long-distance manufacturing.

Hinterland

Area influencing retailing revenue and purchasing power.

Daytime Population Distribution

Concentration of people affecting revenue generation.

Client Establishments

Businesses influencing office revenue through spatial distribution.

Profitability

Maximizing revenue while minimizing operational costs.

Specialized Functions

Urban market services located centrally for efficiency.

Suburbs

Areas attracting firms needing large sites.

External Economies

Cost benefits from firms located near each other.

Zoning Controls

Regulations affecting firm location and land use.

Price Mechanism

Determines profitability and spatial structure of urban areas.

Accessibility

Ease of reaching locations

Transportation Costs

Expenses influencing commercial site demand.

Population Changes

Demographic shifts affecting locational decisions.

Technology Influence

Advancements impacting commercial and industrial location.

Government Policy

Local and central regulations affecting business locations.

Location Importance

Key factor in purchase decisions and development.

Land Acquisition Costs

Expenses associated with securing prime locations.

Desirable Factors

Attractions like transport or climate enhancing location value.

Planned Unit Development (PUD)

Creating value on inexpensive land through design.

Walter Christaller

Analyst of city size and firm composition.

Revenue Decline

Decreased income as distance from CBD increases.

Aggregate Costs

Total expenses rising with distance from CBD.

Joint Demand

Increased revenue from firms benefiting from proximity.

Central Place Theory

Explains human settlements' number

Walter Christaller

Proposed Central Place Theory in urban geography.

Market Area

Region where a firm can underprice competitors.

Low-Order Services

Basic services replenished frequently

High-Order Services

Specialized services requiring larger market areas.

Low-Order Settlements

Settlements providing primarily low-order services.

High-Order Settlements

Settlements providing high-order services to populations.

Threshold Population

Minimum population needed to sustain a service.

Factors Affecting Threshold

Population decrease

Threshold

Minimum market needed for a firm's existence.

Range

Maximum distance people travel for services.

Settlement Hierarchy

Larger settlements are fewer and farther apart.

Population and Range

Range increases as population size increases.

August Losch

Enhanced Weber's theory with demand factor.

Profit Maximization

Firms locate to maximize revenue minus costs.