Weber least cost location theory
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Transcript of Weber least cost location theory
WEBER MODEL OF INDUSTRIAL LOCATION
• Model used to predict the location of an industry.
Keniesha Brown
AssumptionsNumerous, competitive, single-plant
firmsTransportation costs: a linear function of
distanceProducers (firms) face no risk or
uncertaintyInfinite demand for a product at a given
priceIdentical production technology
everywhere(i.e., uniform per unit production costs)
ASSUMPTIONS
• Raw material were not evenly distributed.
• Ubiquitous Raw materials-those found everywhere
• Localised Raw Material-gross and pure
WEBER LEAST COST LOCATION THEORY
Weber produced two types of locational diagrams:
1. A straight line to show examples where one raw material is localised (pure or gross).
2. A locational triangle to show when two localised raw materials were involved.
STRAIGHT LINE DIAGRAM
M
U
U
LRM (pure)
LRM (pure)Least-cost location
M
LRM
Market
U Ubiquitous raw material
One ubiquitous and one pure RM
STRAIGHT LINE DIAGRAM
M
U
U
U
U
LRM (gross)
LRM (pure)Least-cost location
M
LRM
Market
U Ubiquitous raw material
One ubiquitous and one gross RM
LRM (pure)
LRM (gross)
M
LCL will move towards the source of the gross material if there is a heavy weight loss
Localised Raw Material
M (pure)Least-cost location
M Market
One pure RM, one gross RM
Two Gross RMs
LRM (gross)
LRM (gross)
M
LRM (pure)Least-cost location
M
LRM
Market
Solutions to Weber’s Location Problems
FACTORS AFFECTING PRODUCTION COSTS
• Cost of Raw Material• Cost of transportation• Cost of labor• Agglomeration/deglomeration economies
of scale
ISOTIMS AND ISODAPANES
• Since transportation costs were the most important factor affecting production, weber produced a map which would be able to determine the least cost location (LCL)
ISOTIMS
Isotims and Isodapanes
2 sets of isotim
assembly cost
+distribution
cost
Total transport cost
Isodapane
$20
$25
$30
Alfred Weber, 1909Labour costs: Isotims Labour costs as
“distortion” to basic transport costs pattern
Isotim Line of equal
transport cost for any material, RM or FP
“X” has cost of $3.
Case 7: Two Weight-losing raw materials
Isocost lines: concentric rings that connect equal-cost points (isotims) around RM1, RM2 and MKT Weber called the isocost lines corresponding to each point location isotims
ISODAPANES
We can find total transport cost for as many points as we want. And we can connect all the equal cost or equal value total transport cost points to produce what Weber termed isodapanes. In three dimensions, the graph of isodapanes would look like a bowl or depression in the space-cost surface. In two dimensions, it looks like a U. Clearly, the optimal location is in the trough of the depression.
Total transportation costs (TTC) are simply the sum of isotims at any point on the graph
E.g., At X, TTC = 3 + 2 + 2 = 7
Alfred Weber, 1909Labour costs - Isodapanes Isodapane
Line of total transport costs Determined by summing the value of all isotims at a
point And joining all points of equal total transport costs
AGGLOMERATIONIndustrial location may be swayed by agglomeration economies. The savings which would be made if, say, three firms were to locate together, are calculated for each plant. The isodapane with that value is drawn around the three least-cost locations. If these isodapanes overlap, it would be profitable for all three to locate together in the area of overlap.
Alfred Weber, 1909 Overlapping critical isodapanes
Agglomeration economies
Stage 2 - add in Agglomeration Economies