-Extraction or harvest of natural resources
-Countries where the primary sector drives the economy are considered "subsistence" or "pre-industrial
-Mining, agriculture, fishing, forestry
-Process, transform, fabricate or assemble raw materials
-Reassemble, refinish, or package manufactured goods
-Manufacturing, processing (food processing, steel making, textile manufacturing, power production, construction
-Involve the sale and exchange of goods and services to individuals and businesses
-Activities link producers to consumers
-Includes wholesale and retail sales, commercial services (accounting, advertising, marketing) and personal services such as entertainment
-The growth in technology and business leads to specialization of services
-Handling and processing of information and capital
-Includes medicine, law, education, investment and finance, research and development, computer technology
-Activities involve facilitating complex decision making and the advancement of human capacities
-Includes business executives, government officials, research scientists, financial and legal consultants
These things trace the networks of labor and production of a given item from the extraction of raw materials to the consumption of the product.
-Processing or manufacturing
One company controls all the businesses along a commodity chain, thus minimizing costs
-Andrew Carnegie pioneered this, bringing coal and iron mines, steel mills, railroads into his US Steel empire
Absorption into a single firm of several firms involved in the same level of production and sharing resources at that level
People make rational, self-interested economic decisions in determining:
-Location of economic activities
-How much and what to produce
-How much and what to purchase
Law of Supply and Demand
Market equilibrium occurs at the intersection of supply and demand and determines the price of land, goods, services, and wages.
Economy of Sale
Achieved through reductions in cost per unit due to increased production, realized through operational efficiencies.
Mass production, assembly-line techniques, organizational management, higher wages, etc. (i.e., modern-day corporate business)
Addition of "flexible" production, distribution, and marketing systems. Use of computers, just-in-time production/ vertical disintegration.
The "invisible hand" of competition, efficiency of the market place, laissez-faire economics
Smith's idea that a given country can produce some good cheaper than another country.
Countries benefit from specializing in production of certain goods and trading for other goods, regardless of whether they enjoy an absolute advantage in the goods they produce.
Economic Rent Theory
There are three types of land: no rent land, marginal land and optimal land.
This is the value of the difference in productivity between any given piece of land and the poorest piece of land producing the same goods (e.g. bushels of wheat) under the same conditions (of labor, capital, technology, etc.). Labor and capital improvements increase the value and rent of land.
Alfred Weber's Theory of Least-Cost Industrial Location
Industrialists determine locations of "least cost" for their plants by weighing the costs of transportation, labor, agglomeration and deglomeration.
Industries make a product that is heavier than the inputs. They locate near markets. Example: concrete
Industries use a large volume of raw materials , but the finished product is relatively light. Thus processing occurs near the source of raw materials to minimize transportation costs. Example: diamonds
Sources of cheap labor may make up for the cost of long distance transport. Example: garment industry
Factories on the south side of the US-Mexico border (outsourcing). Produce cheap goods for American consumers and provide employment for 600,000 Mexican workers (mostly women).
commonly, a transfer point on a transport route where the type of carrier changes and where large-volume shipments are reduced in size.
Producers often cluster, frequently in major cities, because proximity can lead to savings.
Proximity to other industries allows access to existing labor pools, markets, etc. Thus a company gains advantages beyond its own organization and production methods.
When companies within a specific industry cluster, they create a demand for specialized suppliers and services, skilled labor, technology spillovers
Industries that supply markets outside of the region are critical as a foundation - workers in the "base" industry need services, creating a multiplier effect.
Excessive agglomeration can lead to high rents, wages, and transportation costs that negate cost-savings of agglomeration. Example: Detroit
Companies that participate not only in international trade but also in production, manufacturing, and/or sales operations in several countries
Modern technology and communication (Neo-Fordism) has allowed TNCs to mass produce goods while quickly responding to shifts in demand
Estimate of total market value of all goods and services produced within a country in a given year.
The Human Development Index (HDI)
Economic: GDP per capita
Social: adult literacy, education levels, gender development index
Demographic: life expectancy at birth
Rostow (Modernization) Model
According to the Rostow Modernization model, each stage is a function of productivity, economic exchange, technological improvements, and income. Economic growth occurs when advancing from one stage to another.
1. Traditional Society
2. Transitional Society
4. The Drive to maturity
5. High Mass Consumption
Immanuel Wallerstein's World-Systems Theory
The world system began with the rise of western Europe to world supremacy in the years from 1450 to 1670. Its capitalist economy emerged through:
These mechanisms redistribute resources from the periphery (and semi-periphery) to the core.
Thus, development requires underdevelopment elsewhere.
The _____ location for any economic activity depends on what it is producing. Different economic activities have different cost structures.
Additional costs of purchasing or selling a good or service beyond its actual price and transportation costs. Includes identifying buyers and sellers, finding and attracting skilled workers and investors, working our technological specifications and delivery schedules with parts suppliers and customers, learning new technologies and acquiring info and finally, dealing with delays.
This type of agglomeration can occur in an area as small as a few city blocks or as large as a metropolitan area. Eg. Lace in Brussels, Beglium; finance in NYC; fashion in Milan
Technological, scientific and business information that passes among people and companies. "Being in the loop"
Cost-saving externalities derive from an in6crease in the size of the place and accrue to most firms in most industries
Engineering firms, advertising agencies, printing shops, accounting firms, corporate law firms, temporary employment agencies, freelance editors...etc
Spatial division of labor
When different stages of production can be spatially separated, with each located to minimize its own particular cost structure ie. Apple
Produce mainly for the local market, supplying the needs of the region's inhabitants and businesses
Money brought in from outside to employ workers in the basic industries and each job created in the base sector creates more jobs in the nonbasic sector
-Progressive stages of economic growth, economic structural change, trickle-down economics
-Investment, substituion of capital for labor, technology transfer, large-scale industrialization projects
-Human welfare, core-periphery model, circular and cumulative causation, neocolonialism, bottom-up economics
-Small-scale and rural enterprises, import substitution, nationalization
-Free market economics, transition economies
-Privatization, foreign direct investment, reduced role of the state, free trade, currency devaluation
-Global environmental change, environmental economics, women and development, children and development
-Partnership with developed countries, foreign direct investment, market mechanisms for environmental regulation, resource conservation, renewable resources, loads to women and very poor, women's and children's rights, appropriate technology
Circular and Cumulative Causation
Forces set into motion a squence of other fores that create a self-sustaining snowball effect. Capital. Labor. Innovation and Services.
The preindustrial structure of independent local centers with small market areas and little interaction.
Early industrialization brings concentration of investment, wealth and power into a single, strong core. The periphery provides raw materials and labor to the core and the core provides manufactured goods to the periphery. The net result is a draining of wealth from the periphery to the core.
As industry develps, the core remains the dominant center, but regional subcenters begin to emerge. The core and regional subcenters exchange manufactured goods and services while continuing to receive raw materials and labor from the periphery.
Ultimately a mature and functionally interconnected space economy emerges in which the periphery has been absorbed into nearby metropolitan economies.