Neoclassical Firm Location Theory

1000 Words4 Pages
Location theory gives us answer on the main question: why does economic activity take place here rather than other there? This can contain questions why do a manufacturing firm selects one community over another or why certain types of retail and service business are located in some communities and not others. Otherwise we could focuses on how a system of cities is formed on the economic landscape. This question is at the heart of the space element of the Shaffer Star. There are a range of potential theoretical ways to think about these questions including: Neoclassical Firm Location Theory  Growth Pole/Center Theory  Central Place Theory  Behavioral Approach  Institutional Approach  Agglomeration Theory (ala Michael Porter Cluster Theory) There are four “traditions” in neoclassical location theory:  Land use: (von…show more content…
• Housing moving out from the central market. • Then gardens (vegetables) and animal pens. • Crops and grazing. There are two factors at play in explaining this pattern:  Weight of materials to be transported.  Frequency of transport. Heavier materials will tend to be located closer to the village center and items that are transported more frequently will also be located closer to the village center. Villages that rely on a well for freshwater will tend to be built around the well, or the well in the center of the village. Why? Water is heavy and households potential need to make frequent trips. Neoclassical Location Theory But von Thünen’s contribution as an economist was his observations on land values or rents. He observed the land rents tended to be higher in the center of the village and progressively decline as you moveway from the center .Neoclassical Location TheoryMarket Center(Central Business District) Distance from Market Center Distance from Market Center In this simple example, there are three land uses: “X” village shops or stores, “Y” housing, and “Z”

    More about Neoclassical Firm Location Theory

      Open Document