LOCATION ECONOMICS.
INTRODUCTION
Economic
growith can be associated with the growith in urban areas, the urban areas are
densely peopulated and thus is where we have job opportunities, high level of
productivity and many forms. Urban areas have different functions in that some
are political cities, administrative cities, industrial cities, religious
cities, tourist cities and finally multary cities.
In economics the size fen urban
areas is determinated by the level of output by the urban area urban area emerge
when firms tend to gain opportunity cost by locating in the area this aand the
firm to generate more profits in the area, urban area will generate demand for
labour who work in hte firm that are located in the area, as more and more
labour is demanded labourers tend to locate near the city in order to near the
city then the femand for goods in the city will expand leading to more
expansion of the city.
The following are the factors that a
firm will consider when locating its production process thus indude transport
cost. Production cost and amenities.
Location economics.
Firm
will locate in an area where it reduces both its procurement cost and also the
distribution cost, procurement costs are those costs associated with the
transport costs in distributing goods and servece to the custorners.
When
the procurement costs are ower than the distrinution costs then a firm will
locate near the source of its raw material i order to goin competitive drantage
through its reduction in its cost production.
When the disribution cost are lower
than the near the markat this reduces the cost of producing the gods and
therefore form gain competitive advantages.
If the form is a monopoly then the
firm does not necessary take into consideration the location a firm will aos
allocate near its cometitors in order to expenence a reduction in the cost of
production they will locate near competitors in order to reduce the cost fo
merketing become consumers are closer to them, the consumers will have a
variety of goods and service to choosen form.
Therefore the firm will locate in an
area where there is a possibility of reducing the price of production. The
level of out put by firms in an area will determine the economic S. Ze of the
area, when out put by firm and housing
hold is high thn the area experiences economic growith.
a) Cost
energy. Minimising the cost of enery is one of the facors that a firm will
consider when to locating its production process. The reduction in the cost of
enery will results into a reduction in the cost of production.
This
is a reasons why most of steel and iron producing form will locate near local
mines costs becouse coal is chapter than any other source of energy.
Forms will also locate in areas
where there is a bundant supply of electric power in order to save on costs of
enery where other source of enery tend to be more expensive than others.
minimising thecost of energy in the economy will there result into reduction in
the cost of production and this will reduce consumer prices.
Cost of labour
Firm will also locate in areas where
the cost of labour is low in areas where
the cost of labour is low them the cost of production is lwo therefore the
sinal price of its products will be low and competitive, for thus reasons most
of forms locate less developed compared to developed countries where the cost
of labour is higher.
Labour is a factor of production in
alsmost all forms, as depicted byt he cost push inflection theory by keynes
then labour cost will increase or decrease the level of final prices in the
economy, therefore of a form is able to reduce the cost of production through
tapping low paying labour then the final prices of its products will be low.
Cost land,
land
is also an important factor in the production process. Form will locate on land
or even use land in producing agricultural products, therfore are education in
the price of land will highly contribute to a reduction in the cost of
production, this will reduce the final price of goods which will hiphly
benefits the economy in therm of growith.
External economies
External economies can be defined as
the advantage that a firm gains as a result of producing more, a firm will gain
advantage if it finds a location where there as a large market and the firm
expands its production process.
Amenities
Form will locate in africa wher
there is abundance of amenities the abundance of social amenities sucha as
hospital, school will encorage hous hold to locate in areas, because home hold
are both pronders of labour into firms and at same time comuner of final
products therefore an increase in amenities in an location will altract labour
into the area who will be consumers of products, therefore will also consumers
of products encouraging economic growith.
Export
Export tend to encourage growinth in
the economy export are sorce of foreign correncies and also help to solve
problem of balance of trade, exports help to solve problem of balance of trade,
exports will also create market for excess production encouraging high level of
production in the economy due to evailability of larger market firms will only
export, goods only if the prices of their commudities are lower int he export
market also export will encourage spealisation where economies will specilise
only on those goods and serices it has both absolute and comparative advantage.
Specilization encourage efficiency
and effectiv3enes of the production process reducing the cost of production.
Therefore the export market in an
economy when the export bring in foreign currency encourage the expansion of
production of goods and servel and at the same time improve the balance of
trade an economy.
Weber’s model of industrial location
Alfred
weber was German (spatial economist) who in 1990, devised amodel to explain and
predict the locaton of industy, like non thinen before him and christaller
later, weber tried to find a sense of order in apparent chaos, and mode
assumtion to simphfy the red world in order to produce his model these
assumption’s were as follows
Ø There
was an isolated state with flat relief, A uniform transport system in all
directions, a uniform climate, and a uniform cultrural, political economic
sytem
Ø Most
of the raw materials were not evenly distributed ecross the plain ( This tyfers
form non thiinen). Those that were evently distibuted (water, clay ) he called
ubiquitous materials. As these did not hav to be tranported firms using then
could locate as near to the market as was possible. Those raw materials that
were not evenly distibuted he called localised gross and pure.
Ø The
size and location of markets were fiexd.
Ø Transport
costs were a funection of the mass (weitht) of the raw materials and the
distance it had to be moved. This was edxpressed in tonnes per kilomenter.
Ø Labour
was found in several fixed locations on the plain at each point it was paid the
same rates, had equivalent skills, was immobile and in large supply. Similarly,
entrepreneurs had equal knowlelage, rilated to their industry, and motivation.
Ø Pefect
competition existed over the plain example markets and raw materials were
unlimited which meant that no single manufactore could influence prices.
REFFERENCES
1. Anthony
samuelson (1964) economics Mc Graw-Hill publisher, New York
2. Brian
snow (1997) macro economics introduction to macroeconomic, roat ledge
kpublisher uk.
3. PHLIF
Hard work (2014) introduction to modern economics person education press. Uk.
4. Statton
(1999) economics, a new introduction Mc Graw hill publisher, New York
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