Weber least cost location theory
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The Weber model of industrial location uses transportation costs to predict where industries will locate. It assumes firms face no risks and have identical production costs everywhere. Raw materials can be ubiquitous and found everywhere or localized in certain areas. Weber developed diagrams to show least cost locations. A straight line diagram shows the location when one raw material is localized and one is ubiquitous. A triangular diagram shows when two raw materials are localized. Isotims represent lines of equal transportation costs, while isodapanes connect points of equal total transportation costs to determine the overall least cost location. Agglomeration economies, or savings from locating near other firms, are also considered.
Weber least cost location theory
- 1. WEBER MODEL OF INDUSTRIAL LOCATION • Model used to predict the location of an industry. Keniesha Brown
- 2. Assumptions Numerous, competitive, single-plant firms Transportation costs: a linear function of distance Producers (firms) face no risk or uncertainty Infinite demand for a product at a given price Identical production technology everywhere (i.e., uniform per unit production costs)
- 3. ASSUMPTIONS • Raw material were not evenly distributed. • Ubiquitous Raw materials-those found everywhere • Localised Raw Material-gross and pure
- 4. 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.
- 5. STRAIGHT LINE DIAGRAM One ubiquitous and one pure RM U U M LRM (pure) U Ubiquitous raw material LR LRM M (pure) Least-cost location M Market
- 6. STRAIGHT LINE DIAGRAM One ubiquitous and one gross RM U U U M LRM U (gross) U Ubiquitous raw material LR LRM M (pure) Least-cost location M Market
- 7. LRM (pure) Localised Raw Material Least-cost location M (pure) M Market One pure RM, one M gross RM LCL will move towards the source of the gross LRM material if there is a (gross) heavy weight loss
- 8. Two Gross RMs LR LRM M (pure) LRM (gross) Least-cost location M Market M LRM
- 9. Solutions to Weber’s Location Problems
- 10. FACTORS AFFECTING PRODUCTION COSTS • Cost of Raw Material • Cost of transportation • Cost of labor • Agglomeration/deglomeration economies of scale
- 11. 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)
- 12. ISOTIMS
- 13. Isotims and Isodapanes 2 sets of isotim $30 assembly $25 cost + $20 distribution cost Total transport cost Isodapane
- 14. Alfred Weber, 1909 Labour 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.
- 15. 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
- 16. 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.
- 17. 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
- 18. Alfred Weber, 1909 Labour 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
- 21. AGGLOMERATION Industrial 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.
- 22. Alfred Weber, 1909 Overlapping critical isodapanes Agglomeration economies
- 23. Stage 2 - add in Agglomeration Economies