Question

Key definition:

the four types of agglomeration economics

Resources Vs Market oriented firms

central park theory

labor pooling

urban utility curve

Answer 1

Agglomeration refers to the benefits of the cheapening of production due to the concentration of firms. Firms with a high proportion of manufacturing expenses in their total costs of production have a strong tendency to agglomerate because external economies can largely be effected in that sphere. Four types of agglomeration economies are as follows:

1. Cheaper Transport Facility : The well-developed transportaion system and networked roads, rail infrastructure facilitates easy and timely availability of raw materials and delivery of finished goods.

2. Banking Facility : Banks open their branches in the area where industries have decided to concentrate. The firms enjoyies economies of finance facility at their doorstep.  

3. Research and Develompment: Firms enjoy benefits of latest research and development by locating in a certain area.

4. Labor: Trained labor force available for work and demand of firms for labor is adequately fulfilled.

The firms having a relatively high cost of transporting its inputs are called as resource-oriented firms. The weight of transferable inputs is higher in monetary terms.

The firms having a relatively high cost of transporting outputs into the market are called as market-oriented firms.

The Central Place Theory was developed by Walter Christaller to determine the number, size and distribution of towns and cities. The theory proposes that towns with the lowest level of specialization would be equally spaced and surrounded by hexagonally shaped hinterlands. It has relevance for the location of manufacturing industry in a special case where production tends to be centralized and the market is really extended.

Labor Pooling: A pool of workers having adequate training from which workers can be employed by the firms.

The Urban Utility Curve shows relationship between the utility of workers and the number of workers. There is always an optimal city size at which utility of workers is maximum. Firstly, utility increases as the number of workers increase (positive slope of the curve) and reach an optimal level and after reaching the optimal level, the utility of workers starts falling (negative slope of the curve).