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Terms in this set (72)

*Developed in 1909 by German economist Alfred Weber explaining the key decisions made by businesses about where to locate factories

*Attempts to predict the location of a manufacturing site relative to the location of the resources needed to produce the product and where the final product will be sold (market)

*Focused on three key variables
-transportation
-labor
-agglomeration

*One major factor in the main cost of obtaining raw materials and shipping finished products is weight

*The history of manufacturing demonstrates the importance of a source of power; the type of power influence where factories were established

*Weber argued that factory owners balance three factors in deciding where to open a factory:
-transport costs
-labor costs
-agglomeration economies

*According to Webber, companies should minimize transport and labor cost and maximize agglomeration economies

*Sometimes the cost savings from either cheaper labor or from agglomeration economies could be greater than the savings derived form locating at the cheapest spot relative to transport costs; in these cases, Weber recognized that business owners should chose to locate where the cheaper labor or benefits from the agglomeration economies existed

*In Weber's general theory:
-the area considered was an isotropic plain
-sufficient labor is available in fixed locations and is immobile
-raw materials are found only in certain fixed locations
-there is one product produced, and it is for a single market in a fixed location
-transportation costs are directly related to the distance of travel and to the weight of the items
*economic factors dominate the decision about where to locate a factory
-owners want to minimize costs
*One method of showing Weber's least cost model

*The market for a good is at one location and the resources needed to make up the good are obtained at two other locations (these three points make up the points of a triangle)

*Transportation costs are important to manufacturers; whether a raw material loses weight during processing influences where a factory should be:
-if neither raw material used in production loses weight during processing, then the company gets no advantage from locating the factory near either location; the manufacturing could take place at the location of the market
-if only one raw material loses weight when processed, then the company can save money by moving production close to the location for that raw material; it doesn't need to pay the cost of shipping the full weight of the material when only part of it is needed
-in most cases, both raw materials lose weight as they are processes; when this happens, then the manufacturing site will be somewhere between the locations of the two raw materials; the intermediate location will be closer to the one that loses the greater percentage of its weight; the finished product would then be shipped directly from processing facility to the market

*Sometimes the cost savings from either cheaper labor or from agglomeration economies could be greater than the savings derived from locating that the cheapest spot relative to transport costs; in these cases, Weber recognized that business owners should chose to locate where the cheaper labor or benefits from the agglomeration economies existed
*According to the International Trade Model, each country is in one of these five stages of development:

1. Traditional Society: has not yet started a process of development; contains a very high percentage of people engaged in agriculture and a high percentage of national wealth allocated to "nonproductive" activities (e.g. military and religion)

2. Preconditions for Takeoff: an elite group initiates innovative economic activities; under the influence of these well-educated leaders, the country starts to invest in new technology and infrastructure, (e.g. water supplies and transportation systems); support from international funding sources often emphasizes the importance of constructing new infrastructure; these projects will ultimately stimulate an increase in productivity

3. Takeoff: rapid growth is generated in a limited number of economic activities (e.g. textiles and food products); these few takeoff industries achieve technical advances and become productive, whereas other sectors of the economy remain dominated by traditional practices

4. Drive to Maturity: modern technology, previously confined to a few takeoff industries, diffuses to a wide variety of industries, which then experience rapid growth comparable to the growth of the takeoff industries; workers become more skilled and specialized

5. Age of Mass Consumption: the economy shifts from production of heavy industry (e.g. steel and energy) to consumers goods (e.g. motor vehicles and refrigerators)

*Assumed that all countries wanted to modernize, and that all would, though at different speeds

*Saw economic development as a linear progression in which countries moved from one stage to the next