weber least cost location theory

WEBER MODEL OF INDUSTRIAL LOCATION

• Model used to predict the location of an industry.

Keniesha Brown

AssumptionsNumerous, competitive, single-plant

firmsTransportation costs: a linear function of

distanceProducers (firms) face no risk or

uncertaintyInfinite demand for a product at a given

priceIdentical production technology

everywhere(i.e., uniform per unit production costs)

ASSUMPTIONS

• Raw material were not evenly distributed.

• Ubiquitous Raw materials-those found everywhere

• Localised Raw Material-gross and pure

WEBER LEAST COST LOCATION THEORY

Weber produced two types of locational diagrams:

1. A straight line to show examples where one raw material is localised (pure or gross).

2. A locational triangle to show when two localised raw materials were involved.

STRAIGHT LINE DIAGRAM

M

U

U

LRM (pure)

LRM (pure)Least-cost location

M

LRM

Market

U Ubiquitous raw material

One ubiquitous and one pure RM

STRAIGHT LINE DIAGRAM

M

U

U

U

U

LRM (gross)

LRM (pure)Least-cost location

M

LRM

Market

U Ubiquitous raw material

One ubiquitous and one gross RM

LRM (pure)

LRM (gross)

M

LCL will move towards the source of the gross material if there is a heavy weight loss

Localised Raw Material

M (pure)Least-cost location

M Market

One pure RM, one gross RM

Two Gross RMs

LRM (gross)

LRM (gross)

M

LRM (pure)Least-cost location

M

LRM

Market

Solutions to Weber’s Location Problems

FACTORS AFFECTING PRODUCTION COSTS

• Cost of Raw Material• Cost of transportation• Cost of labor• Agglomeration/deglomeration economies

of scale

ISOTIMS AND ISODAPANES

• Since transportation costs were the most important factor affecting production, weber produced a map which would be able to determine the least cost location (LCL)

ISOTIMS

Isotims and Isodapanes

2 sets of isotim

assembly cost

+distribution

cost

Total transport cost

Isodapane

$20

$25

$30

Alfred Weber, 1909Labour costs: Isotims Labour costs as

“distortion” to basic transport costs pattern

Isotim Line of equal

transport cost for any material, RM or FP

“X” has cost of $3.

Case 7: Two Weight-losing raw materials

Isocost lines: concentric rings that connect equal-cost points (isotims) around RM1, RM2 and MKT Weber called the isocost lines corresponding to each point location isotims

ISODAPANES

We can find total transport cost for as many points as we want. And we can connect all the equal cost or equal value total transport cost points to produce what Weber termed isodapanes. In three dimensions, the graph of isodapanes would look like a bowl or depression in the space-cost surface. In two dimensions, it looks like a U. Clearly, the optimal location is in the trough of the depression.

Total transportation costs (TTC) are simply the sum of isotims at any point on the graph

E.g., At X, TTC = 3 + 2 + 2 = 7

Alfred Weber, 1909Labour costs - Isodapanes Isodapane

Line of total transport costs Determined by summing the value of all isotims at a

point And joining all points of equal total transport costs

AGGLOMERATIONIndustrial location may be swayed by agglomeration economies. The savings which would be made if, say, three firms were to locate together, are calculated for each plant. The isodapane with that value is drawn around the three least-cost locations. If these isodapanes overlap, it would be profitable for all three to locate together in the area of overlap.

Alfred Weber, 1909 Overlapping critical isodapanes

Agglomeration economies

Stage 2 - add in Agglomeration Economies