OTHER RESOURCE-ORIENTED

ACTIVITIES
Condition: monetary weight of the input
will exceed the monetary weight of the
output.
Solution: the firm will locate near to its
input source.
 REASONS WHY FIRMS LOCATE

1.BULKY
2.PERISHABLE
3.FRAGILE
4.HAZARDOUS
COTTON BALING
CANNING
SKUNK DEODORIZING
AUTOMOBILE ASSEMBLY
MARKET-ORIENTED FIRMS
Condition: The monetary weight of
the output exceed the monetary
weight of the input.

Solution: the firm will locate near

their markets or output production
BAKERY
WEAPONS
 2 CONDITIONS TO BE MET IN ORDER
FOR FIRMS TO BE INDIFFERENT IN
LOCATING (INTERMEDIATE LOCATION)

1. The monetary weight of the

input is equal to the monetary
output
2. Unit transport costs are
independent of the distance
shipped
 NOTE! INTERMEDIATE LOCATION IS
ELIMINATED BY SCALE ECONOMIES IN
TRANSPORTATION.
SCALE ECONOMIES - are the cost
advantages that enterprises obtain due
to size, output, or scale of operation,
with cost per unit of output generally
decreasing with increasing scale as
fixed costs are spread out over more
units of output.
 SCALE ECONOMIES arises for 2
reasons:
1. TERMINAL COSTS- the fixed cost of the
shipment are the costs if the unloading and
loading the goods and the cost of the
paperwork for the shipment.
(because these costs is independent of the distance shipped, the average shipping cost decreases as the distance shipped increases.)

2. LINE-HAUL ECONOMIES- the shipping costs

per mile decreases as the distance shipped
increases, reflecting the efficiencies from
using different modes.
(firm use trucks for short hauls, trains for medium length trips and ships for long hauls)