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"-----' Alfred Weber's Theory of IndustrialLocation.

Alfred Weber formulated a theory of industrial location in which an industry islocated where the transportation costs of raw materials and final product is aminimum. He singled out two special cases. In one the weight of the final productis less than the weight of the raw material going into making the product. This isthe weight losing case. In the other the final product is heavier than the rawmaterials that require transport. Usually this is a case of some ubiquitous(available everywhere) raw material such as water being incorporated into theproduct. This is called the weight-gaining case.

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Figure 1 shows the situation in which the processing plant is located somewherebetween the source and the market. The increase in transport cost to the left ofthe processing plant is the cost of transporting the raw material from its source.The rise in the transportation cost to the right of the processing plant is the costof transporting the final product. Note the line on the left of the processing planthas a steeper slope than the one on the right.

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"-- Figure 2 shows the situation if the processing plant is moved closer to the sourceof raw material. Note that the transport cost of the final product delivered to themarket is lower than in the previous location. The transportation cost for theproduct delivered to the market will be lowest of all if the processing plant islocated at the source of the raw material, as shown in Figure 3.

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The weight gaining case is illustrated in Figures 4, 5 and 6. The optimal locationof the processing plant in this case is at the market. Weber established that firmsproducing goods less bulky than the raw materials used in their production wouldsettle near to the raw-material source. Firms producing heavier goods wouldsettle near their market. The firm minimizes the weight it has to transport and,thus, its transport costs.

Industrial Location Assignment:

Directions: Read Chapter 24. Answer the following questions. Type or writeclearly on a separate sheet of paper.

1. List three variable costs that decision makers take into account whencalculating efforts to maximize advantages.

Hops & Grain Fields Mountain Springs

'--2. What does friction of distance refer to? How is the concept of distance decayrelated?

3. According to Alfred Weber's Least Cost Theory, what accounts for the locationof manufacturing plants?

4. Now put Weber's theory to work in deciding where to locate a new brewery.Here's the scenario:

Material (per case) Rail Transport Cost Road Transport CostHops & Grain $.10/mile $.11/mileSprinq Water $.05/mile $.03/mileBottled Beer $.25/mile $.27/mile

Thirsty Town

10 Mile Rd. 10 Mile Rd.

6 miles _ - -t - 5 miles- --- ~-.,. _ - Rail Juncture - - _- -- -

According to Weber, where will you locate the new brewery and why?

5. Now put Weber's theory to work in deciding where to locate a new steel factoryfor a growing town. Here's the scenario:

Material (per case) Rail Transport Cost Road Transport CostIron Ore $.40/mile $.44/mileCoal $.35/mile $.38/mileSteel $.30/mile $.33/mile

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'--- Booming Town

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According to Weber, where will you locate the new steel factory and why?

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