ECONOMIC GEOGRAPHY: Economically rational - they make locational,

production, or purchasing decisions in light of a

Livelihood and Economy: From Blue Collar to
perception of what is most cost-effective and
Gold Collar
advantageous.

Market Mechanism
Components of the Space Economy - All human
- market control mechanism is measured by
activity has spatial expression.
price—the price of land (rent), of labor (wages),
- In the economic sphere we recognize of a college course (tuition), or of goods at the
regions of industrial concentration, store.
areas of employment and functional
Maximizing Profit
specialization, and specific factory sites
and store locations - each may consider a host of production and
marketing costs and political, competitive, and
Primary industries are tied to the natural
other limiting factors
resources they gather or exploit.
- respond to individual behavioral quirks
- Location is predetermined by the
distribution of minerals, fuels, forests, Supply and demand
fisheries, or natural conditions affecting
- the higher the price of a good, the more of it
agriculture and herding.
will be offered in the market
Secondary industries involved in material
processing and goods production.
Market Equilibrium - marked by the point of
- have different spatial constraints than
intersection of the supply and demand curves
do the retailing activities of tertiary
and determines the price of goods, the total
industry
demand, and the quantity bought and sold.
- recurring set of economic controls may
be identified. - price at which supply equals demand,
satisfying the needs of consumers and
the profit motivation of suppliers
Concepts and Controls
Supply Curve - price of a good increases, more
- controls that are assumed to exist are
of that good will be made available for sale
rooted in observations about human
spatial behavior in general and - Countering any tendency for prices to
economic behavior in particular. rise to infinity is the market reality that
the higher the price, the smaller the
Distance Decay - the intensity of spatial
demand as potential customers find
interaction decreases with increasing separation
other purchases or products more
of places
cost-effective.
Von Thünen’s model of agricultural land use-
Demand Curve - how the market will expand as
rooted in conjectures about transportation cost
prices are lowered and goods are made more
and land value relationship.
affordable and attractive to more customers.

Secondary Activities:
• Gives form utility to the products of
primary industry through
manufacturing efforts
• Involved in material processing and
goods production
Secondary Activities:
• Movable, rather than spatially tied
• Locational decision involves the
weighting of the locational “pulls” of a
number of cost considerations and
profit prospects
Secondary Activities: Manufacturing -
Manufacturers must consider costs of raw
materials, distance and from markets, wages of
labor, outlays for fuel, capital availability and
rates, and a host of other inputs to the
production and distribution process.
Locational Decisions in Manufacturing - It
involves the assembly and the processing of
inputs and the distribution of the output to
other points and therefore presents the
question of where the processing should take
place.
Secondary activities - involve transforming raw
materials into usable products
Principles of location
1. Certain input costs of manufacturing are
spatially fixed costs
2. Other input costs of manufacturing are
spatially variable costs
3. The ultimate aim of the economic
activity is profit maximization
4. The locational determinant is apt to be
the cost that is an important
component of total costs and shows the
greatest spatial variation.
5. Transportation charges—the costs of
accumulating inputs and of distributing
products—are highly variable costs
6. Individual establishments rarely stand
alone; they are part of integrated
manufacturing sequences and
environments in which
interdependence increases as the
complexity of industrial processes
increases
Raw materials -All manufactured goods have
their origins in the processing of raw materials
- Most manufacturing is based on the
further processing and shaping of
materials
- The quality, amount, or ease of mining
or gathering of a resource may be a
locational determinant if cost of raw
material is the major variable and
multiple sources of the primary material
are available
- material orientation examples:
Fruit and vegetable canning in
California, mid-western meat packing,
and Florida orange juice concentration
and freezing
- Multiple raw materials might dictate an
intermediate plant location.
Power supply- For some industries, power
supplies that are immobile or of low
transferability may serve to attract the activities
dependent upon them
- Industrial Revolution - water power
sites localized textile mills, and fuel
(initially charcoal, later coking coal)
drew the iron and steel industry
Labor- a spatial variable affecting location
decisions and industrial development.
labor flexibility - implying more highly
educated workers able to apply themselves
to a wide variety of tasks and functions
- 3 different considerations: price, skill,
and amount—of labor were considered
 to be determinant singly or in
combination.
Market -the size, nature, and distribution of
markets may be as important in industrial
location decisions as are raw material, energy,
labor, or other inputs.
Market Orientation - the transportation charges
for sending finished goods to market are a
relatively high proportion of the total value of
the good
Ubiquitous industries - certain producers are, in
fact, inseparable from the immediate markets
Transportation- difficult to isolate its separate
role
- Industrial Revolution is usefully seen as
initially and simultaneously a
transportation revolution –
- peoples and commodities enlarged the
effective areas of spatial interaction
made integrated economic
development and areal specialization
possible.
Transportation and location - indicates the
general pattern of industrial orientation related
to variable transportation costs
- Freight rates - to discriminate between
commodities on the basis of their
assumed ability to bear transport costs
in relation to their value.
- In addition to these forms of rate
discrimination, each shipment of
whatever nature must bear a share of
the fixed costs
- Terminal costs – are charges associated
with loading, packing, and unloading of
a shipment and of the paperwork and
shipping documents it entails
- Line-haul or over-the-road costs vary
with the individual shipments and are
the expenses involved in the actual
movement of commodities once they
have been loaded.
Industrial Location Theories - Theorists
beginning in the first third of the 20th century
set themselves the task of sorting through that
complex in the attempt to define its underlying
structure.
• Least-cost theory -Least-Cost Theory
- Based on the work of Alfred Weber
(1868-1958)
- Explains the optimum of a
manufacturing establishment based on
minimizing three basic expenses:
- Relative transport costs
- Labor costs
- Agglomeration costs
- Agglomeration refers to the clustering
of productive activities for mutual
advantage
- Weber concluded that transport costs
are the major consideration
determining location
- The optimum location will be found
where the costs of transporting raw
materials to the factory and finished
goods to the market are at their lowest
- Assumptions: (Least-Cost Theory)
● Isotropic plain
● Single product to a single market
● Raw materials from two or more
sources
● Labor infinitely available but
immobile
● Transportation routes are not fixed
but connect places by a straight line
• Locational interdependence theory -
locational decision of one firm is
influenced by locations chosen by its
competitors
- Variable revenue analysis
- Competitive locations in a linear market
- a measure of spatial monopoly in their
combined market
- the concern is with variable revenue
analysis rather than, as in the Weber
model, with variable costs.
 - The economist Harold Hotelling
(1895–1973), who is usually associated
with the locational interdependence
approach
● Profit-maximization approaches - a
substitution principle that recognizes
that in many industrial processes it is
possible to replace a declining amount
of one input.
- Spatial margin of profitability
- Satisficing locations
- Price sensitivity (elasticity of demand)
will encourage industrial dispersion
● Other locational considerations and
controls
- Agglomeration economies - the spatial
concentration of people and activities
for mutual benefit
- Just-in-time and flexible production -
seeks to reduce inventories for the
production process by purchasing
inputs for arrival just in time to use and
producing output just in time to sell.
- Comparative advantage - tells us that
areas and countries can best improve
their economies and living standards
through specialization and trade
- Outsourcing - producing parts or
products abroad for domestic sale.
- Offshoring - the practice of either hiring
foreign workers or, commonly,
contracting with a foreign third-party
service provider to take over and run
particular business processes or
operations.
- Imposed considerations
- Transnational corporations
World Manufacturing Patterns and Trends
• Anglo America- has been steadily
declining. In 1960, the 28% of the labor
force engaged in manufacturing
generated nearly one-third of the
region’s wealth.
• Western and Central Europe- By 1900,
Europe accounted for 80% of the
world’s industrial output though, of
course, its relative position has since
eroded, particularly after World War II.
• Eastern Europe - Between the end of
World War II and 1990, Eastern
European industrial concentrations,
such as that of Silesia in Poland and the
Czech portion of the Bohemian Basin
were largely cut off from their earlier
connections with the larger European
market and economy.
• Eastern Asia - The Eastern Asian sphere
is rapidly becoming the most productive
of the world’s industrial region
- Japan has emerged as the overall
second-ranked manufacturing nation
- China—building on a rich resource base,
massive labor force - top 10 producers
of a number of major industrial
commodities;
- by 2006 China’s economy had become
the world’s fourth largest, after the
United States, Japan, and Germany.
South Korea, Taiwan, Singapore
- Hong Kong, were recognized as “the
four tigers,” swiftly industrializing Asian
economies that have become major
presences in markets around the world.
High-Tech Patterns - processing and production
that is increasingly part of the advanced
economies.
• Impacts of high-tech industries
• Agglomerating forces
• Contributors to production
Tertiary and Beyond • Quinary

• Services – “Gold Collar” professions

• Business and labor specializations that – Special and highly paid skills of
provide services to the primary and top business executives,
secondary sectors, to the general government officials, research
community, and to the individual scientists, financial, and legal
consultants
Tertiary - Lower-level services largely related to
day-to-day needs of people and to the usual Services in World Trade
range of functions found in smaller towns and
• Impact in international trade flows
cities
• Impact in economic interdependence
• Service activities are by definition
market oriented • Foreign direct investment (FDI)
• Retailers and personal service providers
tend to locate where market density is
greatest and multiple service demands
are concentrated

• Quaternary

• Information, administration,
and “knowledge”

• Dependent on communication

• Dispersion has been facilitated

by electronic digital processing
and telecommunication transfer
of data

Quaternary and Quinary Activities

• Quaternary

– An advanced form of services

involving specialized
knowledge, technical skills,
communication ability, or
administrative competence

– Transportability of these
activities means that many of
them can be spatially isolated
from their client base