Question

Essay Response (approximate answer length 1-1.5 pages per question)

1) Assume you are a new company that has created a revolutionary product that will have a massive

consumer demand. However, you first need to build a factory to manufacture this product. Using

the Weber Model, explain how you would choose to locate your manufacturing plant, assuming

your product has only two inputs. Does your answer change if your product has three (or more)

inputs?

2) What are the benefits to firms from clustering and agglomeration economies? Can they help and/or

hinder a firm’s competitiveness?

3) Explain the role of age, education, and amenities in migration decisions. How does each influence

the decision to migrate and, from what you have learned in class, which plays the larger role in the

migration decision?

4) Compare and contrast the following models of migration: disequilibrium model, the equilibrium

model, and the endogenous human-capital model.

5) Assume there are two income groups in a city, poor and rich people. In the absence of amenities

(i.e. utility is a function of only the house size and bread consumption), explain where each group

locates and why. Now assume amenities are included in the utility function. What determines

where each group will locate? Does this match what we observe in the real world?

Answer 1

1.

Alfred Weber was a German economist, industrialist, sociologist and theoretician of culture whose work was influential in the development of modern economic geography. Weber supported reintroducing theory and causal models to the field of economics, in addition to using historical exploration. In this field, his achievements include work on early models of industrial location.

Alfred Webers Theory of Industrial Location or Least Cost Theory

Alfred Weber formulated a theory of industrial location in which an industry is located where the transportation costs of raw materials and final product is a minimum. He put forward two special cases. In one scenario, the weight of the final product is less than the weight of the raw material going into making the product and is the weight losing industry. For example, in the copper industry, it would be very costly to drag raw materials to the market for processing, so manufacturing occurs near the raw materials. Besides mining, other main activities or extractive industries are measured as material oriented: timber mills, furniture manufacture, most agricultural activities, etc.. Often located in rural areas, these businesses may hire most of the local population. As they leave, the local area drops its economic base.

In the other, the final product is equally as heavy as the raw materials that need transport. Generally this is a case of some ubiquitous raw material, such as water, being incorporated into the product. This is called the weight gaining industry. This type of industry tends to build up near market or raw material source, and is called foot loose industry. Cotton industry is a noticeable example of weight-gaining raw material.

In some industries, like the heavy chemical industry, the weight of raw materials is less than the weight of the finished product. These industries always grow up near market.

To sum up, Weber Model is developed by Alfred Weber according to which the location of manufacturing establishments is determined by the minimization of three critical expenses: labor, transportation, and agglomeration.

Here, we take into account two factors. region and transportation.

Weber used sociology and geography to develop a theory called Weber's model of industrial location. It focused on something he called the location triangle. The location triangle included the fixed location of the market and two raw material sources. Based on these, his goal was to determine:

1. The cost of moving raw material from both raw material sites to the production facility
2. The cost of moving the good from the production site to the market

If the product has three (or more) inputs the scenario changes. Apart from region and transportation, agglomeration factor also can be taken into account.

Agglomeration is a process involving the gathering or concentrating of people or activities. The term often refers to manufacturing plants and businesses that benefit from close nearness because they share skilled-labor pools and technological and financial amenities.

The point of best transportation is based on the costs of distance to the "material index" – the ratio of weights of the intermediate products (raw materials) to finished product.