Lecture 1 models of location students

Geog. 674.Regional Planning Techniques
Models of Location of Economic Activities
Waqar Ali Shah
MSc Geography and Regional Planning

1. Land and its attributes
Ground for factory installation for storage, packing and internal
circulation, housing industrial workers, and availability of land as per
factory requirement, and locational advantage to transport node and
market.
Land cost variation at inter city or inter regional level influences the
choice of location.
2. Capital
Finance and equipment Financial capital
Capital represented by physical plant
Industrial Location Factors

3. Materials and power
Extractive material (Iron ore, stone or timber)
Manufactured goods (components are purchased from outside)
Materials are not evenly spread over the earth’s surface. Their
distribution is a major determinant of plant location.
Like materials, sources of power can exercise an important influence
on plant location.
Aluminum, copper and fertilizer group of industries is especially
sensitive to the cost of power.

4. Labor and management
The amount and type of labor requirement vary from industry to
industry.
Requirement of cheap labor
Requirement of skilled labor
Requirement of managerial staff
The distinctive labor requirement of particular industries make some
places more suitable location than others.

5. Transportation and fright rates
Postage stamp has no effect on location.
Blanket rate has local and regional effect.
Mileage rate related to the distance to be covered, the nature of
goods and quantity, weight or volume to be shipped.
Terminal cost (cost of loading and unloading and any other
overheads), line haul cost

6. Market and price
Assessment of demand
Market size
Delivery price of the product
Net profit
7. Agglomeration, Linkage and external economies
Inter Industrial linkages and Interdependence
Advantage of developed infrastructure and other

8. Public policy and planning
Preference of specific industrial groups
Preference of specific area
Role of subsidy and taxation
Concession Finance with lower interest and so on.

Alferd Weber
Alferd Weber was a Germen economist and industrialist.
The theory was developed in 1909.
“The theory of location of industry’’ was his most influential
book was published in 1909 in German.
The theory was later translated in English in 1929.
The theory predicts the best location for a plant or factory
keeping in view the locational triangle proposed by Weber
himself.
Webers’ Industrial Location Model

Manufacturing plants will locate where costs are the least. Categories
of Costs:
Transportation: The most important cost-usually the best site is
where cost to transport raw material and finished product is the
lowest.
Labor: High labor costs reduce profit-location where there is a supply
of cheap, non-union labor may offset transportation costs
Agglomeration: When a group of industries cluster for mutual
benefit-shared services, facilities, etc.-costs can be lower

Presence of an isotropic plain
A country or region is homogeneous in terms of culture, climate, topography,
race of people, technical skills of the people and political system. I.e. Plain or
coastal area.
Natural resources are either ubiquitous or localized
a) Pure raw material b) Impure raw material.
Transport system is uniform
Transport cost is directly proportional to the weight and distance travelled.
It is uniform in all directions and signal mean of transportation.
Labour is at fixed points and of different wages
There are fixed locations of labour where wage rates are fixed and labor is
immobile and unlimited
Assumptions of the Model

Conditions and size of market is known.
Demand of product as well as price is uniform.
Perfect competition.
Isolated state where neither export nor imports exist.
Industrialists are economic men, trying to minimize their costs or maximize
profits.
Apart from transport cost, labour cost and agglomeration economies, all
other factors are not considered.
No institutional factors such as taxation, interest, insurances are
considered.
Assumptions of the Model

Transportation cost:
Transport cost are influenced by three basic elements.
The weight to be transported.
The distance to be covered.
The nature of commodity. Sensitive or resilient

 Ubiquitous:
Materials which are found everywhere throughout the isotropic plain.
Water, air and soil etc.
 Localized material:
Materials which are found or available only at specific locations such as timber,
coal etc.
Also called as fixed materials.
Types of raw material

Type of manufacturing process
1. Pure materials / Weight sustaining materials
When weight of raw material as well as finished products are same thus
neither weight is gained nor lost.
E.g. petroleum products.
2. Gross materials/ Weight losing materials
When weight is lost during manufacturing process. Finished product is less
than the raw materials.
Furniture from timber, paper industry, textile industry, steel industry
3. Weight gaining materials
When finished products are more than raw materials.
Automobile industry, baverages industry

Favorable location as per manufacturing process is concerned
Weight gaining materials
Near market
Weight losing material
Near the raw material sources
Weight sustaining materials
Any where it can be built.

 Material Index (MI)
is the proportion of weight of localized materials used to the weight of
the product.
MI= Weight of raw material/ Weight of final product
Material index of sugar milling:
Weight of sugar cane= 7 tonnes
Weight of sugar= 1 tonnes
Weight
-loss industry
Material
-oriented
Material Index (MI)

Cloth manufacturing
10 tonnes of yarn = 1
10 tonnes of cloth
Beverages production
1 tonne of baverages powder = 0.125
8 tonnes of baverages Weight -gain industry
Market oriented
No weight-gain nor
weight loss industry
Footloose location
Material Index (MI)

Factors affecting the location of the industries
1. Regional or primary factors
1. Transportation cost
2. Labour cost
2. Secondary factors
1. Agglomerative factors
2. Degglomerative factors
Factors affecting location of industries

Primary factors
1.Transportation cost
In terms of transportation of raw (from source to plant) as well as finished
products (from plant to market).
Its influenced by:
Weight to be transported
Distanced to be covered.
Nature of commodity
Terminal cost
Weber proposed that industries are established where the transportation
cost is minimum.

2. Labour Cost
Labour cost can affect the price of finished product.
Factors which affect labour cost
Wages differences
Level of efficiency
Experience
High PPP
Labour rules and policies
 Sweated labour
Workers working in miserable
conditions for low pays.
 Immigration policy

It develops concept of Labour cost index.
Labor cost index= Labour cost
weight of the product
If labour cost is = 1000
And weight of product is = 1 kg
So L.C.I is 1000/kg
It seems that labour is very high in the region and we will consider the
transportation rate per kg to low wages area.
Labour Cost……

If transportation rate is Rs. 10/kg and the distance is only 20 km to be
travelled while labour index is only Rs. 400/kg. thus we will calculate
the total cost of production.
10x20+400= 600/kg
As 600 is less then we will establish our industry where the labor is
cheap.
on the other hand if transportation cost is 30/kg and distance is 30km
while labour index is Rs. 400 then
30x30+400= 1300/kg
So we will select the first location as it was only Rs.1000/kg
Labour Cost…..

Secondary factors
1. Agglomeration
It tends to centralize the industries at particular place.
Following benefits are provided by agglomeration.
Sharing of equipments
Sharing of skilled labour
Sharing of expertise
Finished products/ by-product of one industry can be raw material of
other.
Paper industry and automobile industry.

2. Degglomerative factors
Factors which try to decentralize the industries, in result the
industries split away.
These factors can be rent of land, Labour cost and transportation
cost.
If manufacturing cost is less then cost of transportation, labour cost
and rent of land and no gain is provided by the agglomeration thus its
better to move the industry somewhere else.
Note: if we have weight losing material at different locations, we can
develop industries near these resources thus splitting can be
beneficial.

Least Cost Location
Least transportation cost location.
The optimum location can be identified with the minimization of the
total transport cost involved in accumulating raw materials to the place
of production and shipment of finished products to respective markets.
Least cost location can be identified by the help of isotims and
isodapane.

Isotims:
Lines joining points of equal transport
costs of commodity either from Raw
material source or the market.
 Due to the assumption of the
isotrophic and homogenous surface,
the lines are drawn in circles.
Isotims and isodapanes

Isodapane:
Isodapanes are the lines which intersect isotims of both raw material
and market.
• These points show total transport cost of a commodity.

Steps of finding out the least cost location
Step 1: Find out the least transport cost site.
Step 2: Consider if the production unit will move to a cheaper labour
cost site.
Step 3: Consider if the production unit will move to a site where
agglomeration economies are available.

Location of the industry in case of single raw material sources
1. Weight losing materials
Near the Raw material sources that is point A
Location of industries

2. Weight gaining material
Near the Markets that is point C

3. Weight sustaining materials
Any where between market and Raw material sources that's point B

Situation: 1 A one market, one raw material condition gives rise to
three situations.
Raw Material Available Everywhere:
The best location in this situation is the market, as that will simply
eliminate the transportation costs for the manufacturing unit.
Raw Material Fixed, And Pure:
The manufacturing unit, in this case, should be located either at the
market or at the source.
Raw Material Fixed And Gross (i.e. It Loses Weight On Processing):
The best location will be at source.

Situation: 2 A one market, two raw materials (R1, R2) condition gives
rise to four situations.
Both R1 and R2 are found everywhere:
Here, the best location will be at the market, as in that case, lowest
transportation costs would prevail.
R1 is fixed, R2 is found everywhere, both are Pure
The best location would be at the market, because then, transportation
charges for R1 only will have to be paid.
Both R1 and R2 are fixed and pure:
The best location will be at the market, because in that case lowest
aggregate transportation charges will prevail.

When both R1 and R2 are fixed and gross then this is a complex
situation, for which Weber introduced the “locational triangle”.
The locational tringle can have three cases:
Weber's locational triangle

1. Weight losing Material
If both are weight losing raw material source. Ie iron smelting and
paper industry.
Then it would be better to establish plant near the raw material
sources.

2. Weight gaining materials
If both the raw material sources are
weight gaining such as baverages and
baking industry.
 The industry will be located near
the market.

3. Weight sustaining material
If the sum of weight of both the raw
material is equal to the weight of final
product then the industry will form at
the point within the triangle where
distance from all three points is equal.

ROLE OF LABOUR COST
According to Weber, another regional factor for deviation of Industry
from one place to another is Labour Cost. It happens due to
Difference in labour costs.
The Labour costs may differs due to two reasons:
Differences in wage rates.
Differences in the level of efficiency.
According to him, If savings in labour cost per unit of output are
greater than the extra transport cost per unit then the industry take
deviation from Least Transport Cost Point to Least Labour Cost Point.

ROLE OF LABOUR COST
It is describe with the help of given mathematical analysis. These are:
Index of labour cost: It is the average cost of labour needed to
produced one unit weight of output.

Total production cost at point L is less than point P, then the industry
will be established at point L rather than point p because weber
always pointed the factor of least cost location.

As per least transportation cost the point A has been decided as the
location for the plant.
Now considering the fact that the labour cost near the A is 20 rupees per
commodity but at the point B the labour cost decreases to the 5 rupees per
commodity.
Now in case that the saving from labour cost exceeds the saving from the
transportation cost, we will select point B location as per least labor cost
location
Point A Point B
Labour cost= 20 Labour cost= 5
Transportation cost= 3 Transportation cost= 9
Total = 23 Total = 14

ROLE OF AGGLOMERATION OF INDUSTRIES
Agglomerative refers to the advantages or cheapening of cost
production due the concentration of an industry.
In others words –minimizing cost of production due to centralization of
many industries in a particular area through internal and external
economics of various kinds such as:-
Raw material provision Sharing of equipments
Specialization
Large scale of business and selling
Shared transportation
Subsidies

 Each industry has its own
isodapanes
 the place where isodapanes
of all the industries overlap is
the best place to develop an
industry to get maximum
advantage from
agglomeration.

Criticism

Assumption1:
An isotrophic plain, uniform physical and human settings
Reality:
It rarely exists in the real world.
Assumption2:
Uniform transport system, and single means of transportation, freight
rate is directly proportional to weight and distance of haulage.
Reality:
It rarely exists, freight rate tends to taper off with increasing distance.
Unrealistic Assumptions

Assumption 3:
Labour is at fixed points and with different rates and unlimited supply of
labour.
Reality:
Labour is more mobile and with different skill levels and limited at a times.
Assumption 4 :
Industrialists are economic men, profit maximizers.
Reality:
It is hard for them to have complete knowledge, they tend to be a satisfier
Special affiliation with an area or the people.

Assumption 5 :
Apart from transport, labour and agglomeration economies, other factors don’t vary
spatially.
Reality:
land price, government policy, technology and behavioral factors become
increasingly significant in industrial location
Assumption 6:
Fixed markets (Static approach)and complete dominance (Monopoly)
Reality:
Its means state with in a state (impossible)
There are more than 1 markets in a region

Extra exaggerated the transportation and labour cost.
Did not consider Non-economic factors such as historical and cultural
factors.
Did not consider land value at all.
Technological advancement were not discussed.
No behavioral consideration such as brain drain and brain gain.

Its not practicable in the modern world.
Yet holds it significance even today.
1st time concept of industrial location was given.
Inspiration for coming researchers to work further for the location of
industries.
With passage of time the industrial location theories became more
complex and accurate.
Applicability and significance

Market Area Theory
of Tord Palander

Swedish Economist.
Propose the theory in 1935.
He was Influenced by work of Weber.
He used Weber techniques of Isodapane for the transportation cost
but with just small difference.
Market Area Theory of Tord Palander

Transportation cost in terms of cost of movement rather than weight
to be transported.
He gave realistic arrangement of the Cost of transportation Vs
Distance relationship.
How tendency goes on as we move to larger distances.
More the distance, less is the rate of per unit commodity.
Transportation cost

These were two basic questions or conditions rather than assumptions.
A. 3 factors are well known:
Location of resources
Position of markets
Location of industries.
First, given the price and location of materials and the position of
market, where will production take place?
Basic Assumptions

B. We also know that:
Competition in markets
Factory Cost of commodity
Transportation cost
Second, given the place of production, the competitive conditions,
factory costs, and transportation rates, how does price effect the
extent of area in which a producer can sell his goods?

How does the price effects the
extent of area to which a product
will be sold out.
Remember, market is same.

As per weber we had single raw material and 2 raw material sources
and according to the nature of manufacturing process we decided
where the location will be.
1. Single raw material source
Either near the market or source. Condition???
Or anywhere in between the market and sources. Condition???
2. 2 Raw material sources. (Formation of triangle)
3. Exactly in the center, equidistant from all three points.
Condition???
4. Near the corners. Condition???
Revision of Weber's theory

Market Boundary
As we already know that both A and B firms are selling same product
with in a same market is assumed to be linear.
Market boundary is a line in the linear market where delivery price of
both the firms are equal.
We can represent it with X

Situation wise least cost location
By graphs, we can explain the 5 situations where vertical line shows
delivered price and horizontal line shows market and its boundaries.
Remember:
Delivered price = cost of production + transportation cost.
Transportation cost= cost to deliver the commodity to the customer.
Situation wise least cost location

A.
Production cost A p= B p
Freight rate Af =Bf

B.
Production cost A p > B p
Freight rate A f =Bf
=

C.
Production cost A p < B p
Freight rate A f <Bf

D.
Freight rate A f >Bf
>

E.
Freight rate A f <Bf
Area is well dominated by Firm A.

Here in situation E, Firm B cant even serve its adjacent area as well
as delivery price is much higher than A.
But after some distance, due to the low freight rates it will start
serving the area.

 Isotims:
Line joining places where
production cost of commodity is
similar.
 Isotante:
Point where delivered price of
both the firms is equal.
 Isodapane:
Places having equal total
production cost

Comparison between Weber's and Palander’s theories

Loschs’ Industrial Location Model

August Losch
Location of secondary and service activities
1940: Theory was developed and published in German language.
1954: Theory was translated into English language

The first general theory of location with demand as major variable.
Losch rejects the least-cost perspective of Weber and as well as the
alternative of seeking the location at which the revenue is greatest.
The right approach as per Losch’s view is to find the place of
maximum profit.
This theory is an attempt to show how, in given circumstances, all
economic activity should be arranged in space.
Introduction

Assumptions
Isotropic surface and no barriers
Uniform transport rates in all the direction
Evenly distributed raw material
Evenly distributed population
Settlements in form of self sufficient farmstead
Even PPP
Even economic opportunities and technological level
Businessmen look to maximize the profit
No agglomerations and people buy goods from nearest location.
Markets are separate and in circular pattern

Going away from market, the demand decreases while
transportation cost increases.
There is always a possibility of space for any new firm.

Crux of the Theory
Aim of industrialist is maximizing the profits
Profit is directly proportional to consumption
Consumption is directly proportional to Demand
And Demand depends on the delivered price, less the price higher
the demand.
So over all concern is about facilitating the consumers by low
delivered price which increases the demand and consumption and in
the end the profit.

In considering industry, if farmers
start producing a surplus of some
commodity, what spatial economic
pattern will eventually constitute a
state of equilibrium?

Equilibrium:
When Demand = Supply
It is the point when producers as well as consumers are in benefit.
Producers get maximum profit
consumers get affordable price
Less demand causes low rates thus producers get loss.

1. Losch talks about the advantage of location of the firms.
Thus area should be completely served
If any area gets unserved, always possibility that a new firm can be
built.
2. The industry must strongly hold the markets.
3. If businessmen go for abnormal increase in the price, the scenario
for new entry of plant.
Even you have to neglect the transportation cost at the nodes and sell
the product at similar price as of center.

3. As per given assumption of many farmers and farmstead, all the
farmstead have to get small areas to give people best possible
delivered price.
Consumers at the foundries are in dilemma where to buy products
from.
The empty space can give
a chance of entry to the
new plant.

Increase of competition
The size of markets decrease and the circular pattern come closer
together.
Still some unserved areas.

More competition
Surplus is produced = farmers in loss
Areas overlapped and over served.
A plant can dominate if it compromises on its profits and get high sells.
A A
C B

He proposed hexagon shape of settlements to overcome unserved
and overserved areas.
Hexagon has equal distance from the center and can fit all together
even the area is too Large.

Benefits of hexagon shape
6 corners thus many options for the consumers
People local sells will be made
Reduced freight rates as local
production and consumption are made.

Demand cones
Demand is highest at the center of market
Price is lowest at the center
Price increases as we move toward the nodes and demand
decreases.

Merits
First to study demand as factor in industrial location
Concept of equilibrium
Local purchases to be given attentions.
Hexagonal pattern was discussed.

Limitations
Totally ignored transportation rates, labour cost and agglomeration
factor.
Over-exaggerated demand only.
No inter-dependency was discussed.
All the unrealistic assumptions.

Supply Chain:
The chain or system to supply the product from producer to
consumers.
Shelf life:
Maximum time that a perishable good can be preserved before
becoming unusable for consumption.

Smiths’ Industrial Location
Model

D.M.Smith, British Geographer, developed theory in 1966.
Smith in his theory has provided a theoretical framework for
industrial location. His theory is also known as ‘Area-Cost Curve
Theory’.
Smith has attempted to utilize the perfect competition-least cost
approach of Weber with some reference to the monopolistic
competition-market area approach of Losch.
Smiths’ Industrial Location Model

His conceptual design is quite straightforward and is based on
the statements of other location theorists. Recognizing the
complexity of the industrial location decision, Smith began by
simplifying the real-world conditions.
He assumed a profit motive. He observed that processing costs
vary in space as do revenues. The most profitable location will be
where total revenue exceeds total cost by the greatest amount.

Concept of basic and locational cost
Basic cost: The cost that is associated with the project irrespective
of location (cost of materials and labor at source, cost of all other
input factors including land and machinery, etc.).
Location cost: The additional cost (transportation cost) involved in
procuring all necessary input factors and making them available at
the production center.
Total cost of the industry includes both basic and locational cost.

Smith postulates his location model on the following
assumptions:
All producers are in business to make profit (but not necessarily
the maximum profit).
All producers are fully aware of spatial variations in costs and
profits.
Sources of production factors like land, labour and capital are
fixed, and supplies are unlimited, but no substitution can take
place between them.

Demand (revenue) is constant over space.
No firm tries to take advantage of scale economies.
No firm influences the location of another firm.
All entrepreneurs are equally skillful.
No location is subsidized.

In Figure the costs are variable and demand is constant. In this case, with
the same revenue everywhere and only costs varying, о represents the
point of maximum profits, the optimal location.
The limits of profitable operation,
or margins of profitability, Ma and
Mb, can also be seen. Beyond this
margin costs exceed revenue, and
a firm could only operate at a loss.
This is essentially the Weberian
solution.

The reverse situation is shown in (b). Here, costs are the same
everywhere, but with spatial variations in price or revenue.

In Figure c the situation becomes more realistic with both cost and
price varying from place to place.
Maximumprofits are obtained at A, where costs are the lowest (profit
= A1 – A2). Here, profits are higher than at the point of highest price
(В1 — B2). The entrepreneur seeking maximum profits will therefore
choose the least cost location, despite the lower total revenue
obtainable here.

Conclusion:
• The following conclusions have been drawn on the basis of Figures
a, b, c:
In a cost-price situation of this type, spatial variations in total costs
and revenues impose limits to the area in which any industry can
operate at a profit.
Within those limits the entrepreneur can locate anywhere, unless he
seeks maximum profits.
The steeper the cost or price gradients, the greater is the spatial
variation and the more localised the location choice; conversely, the
shallower the gradients, the wider is the location choice – unless
again maximum profits are sought.

To explain the model Smith has used isocost lines and prepared
isocost map which indicates the optimum location. Smith has also
taken into consideration the factors such as: entrepreneurial skill,
behavioral or personal aptitude, existence of subsidies and external
economics.

Merits and Demerits
Main drawback of Smith’s model is that it is a static one, confined
to a particular point in time, with definite locations for optimal
points and margins of profitability.
In fact, conditions in the real world are dynamic; for instance, the
optimal location and the margins of profitability are changing
through time as the spatial cost price situation changes.

Merits and Demerits
Manufacturers in fact may never even try to find the most
profitable location, because they realize that its spatial location
will change.
The businessman might therefore choose a location within the
broad constraints of the profitability margin, relying on his
efficiency and enterprise to build up profits over the long term.

Christaller's Central Place
Theory

Introduction
Central Place Theory is an attempt to
explain the spatial arrangement, size
and number of settlements.
Attempts to explain the relationship
between cities and their hinterlands.
The theory was originally published in
1933 by a German Geographer Walter Christaller who studied the
settlement patterns in Southern Germany.
Christaller's Central Place Theory

Translated into English in 1966
He was influenced by von Thune and Weber By examining and
defining the functions of the settlement structure and the size
of the hinterland
He found in possible to model the paten of settlement
locations using geometric Shapes.
Human settlements like larger villages, towns, cities and
metropolis level centers come under the Central place Theory.

Christaller attempted to design a model that would show
how and where Central places in the urban hierarchy would
be functionally and spatially distributed
Urban hierarchy is based on the functions available in a city.
Is also related to population as well as functions and
services
Functions and services attract people from the urban areas
as well as the hinterlands
Central places compete with each other to provide goods
and services

Assumptions:
Christaller made a number of assumptions such as:
All areas have
An isotropic (all flat) surface
“featureless plain” with no barriers to movement
An evenly distributed population similar in purchasing power
and behavior

Evenly distributed resources
similar purchasing power of all consumers and consumers
will patronize nearest market
transportation costs equal in all directions and
proportional to distance
no excess profits (Perfect competition)

Explanation of some terms:
Central place
It is a settlement which provides one or more services for the
population living around it.
Simple basic services
(e.g. grocery stores) are said to be of low order.
Specialized services
(e.g. universities) are said to be of high order.
Having a high order service implies there are low order services
around it, but not vice versa.

Explanation of some terms
Low order settlements
Settlements which provide low order services are said to be low
order settlements.
High order settlements
Settlements that provide high order services are said to be high
order settlements.
Sphere of influence
The sphere of influence is the area under influence of the Central
Place.

Higher-Order Functions : Higher-Order Central Places
Provision of higher-order goods and services
Trade in goods and services that are more valuable and
infrequently demanded
Because the goods and services are more valuable, people
are willing to travel farther to shop.
Higher-order goods and services are available in higher order
central places.

Lower-Order Functions: Lower-Order Central Places
Provision of lower-order goods and services
Trade in goods and services that are less valuable and
frequently demanded.
Because the goods and services are less valuable, people are
willing to travel only short distances to shop.
Lower-order goods and services are available in lower-order
central places.

Settlement Sizes
Hamlet
Village
Town
City
Metropolis

A hierarchy of Educational Services
City: A college
Town: High school
Village: Elementary school
Hamlet: No schools

A hierarchy of services in an Urban center
Stock Exchange
Sports Stadium
Regional Shopping Mall
Major Department Store
Income Tax Service
Convenience Store
Gas Station

Arrangement of the Central places/ settlements
As transport is equally easy in all
directions, each central place
will have as circular market area
as shown in diagram.

However, circular shape of the market areas results in either un-served
areas or over-served areas

To solve this problem, Christaller
suggested the Hexagonal shape
of the markets as shown in the
diagram.

Within a given area there will be fewer high order cities and towns in
relation to the lower order villages and hamlets.

For any given order, theoretically the settlements will be equidistance
from each other. The higher order settlements will be further apart
than the lower order ones.

Details of the theory
The theory consists of two basic concepts:
Threshold
The minimum number of people needed to support a central place
function
With fewer customers a store cannot afford to stay in business.

Range of good or services
The maximum distance beyond which a person will not
travel to purchase a good or service
Beyond a certain distance people cannot afford the travel
costs.
the average maximum distance people will travel to
purchase goods and services

In theory, low order goods have a
low range and low threshold; less
people are needed to support it,
smaller the distance people are
willing to travel.
Low range and low threshold goods
are sold in small towns, villages etc.

High range and higher threshold
goods are sold in large towns.
Same is true for services. Small
town is only likely to have one
doctor while a city has a hospital.

To buy a new car
Would you travel farther to buy a new car or the week’s groceries?
To see a heart specialist?
Would you travel farther to see your family physician or a heart
specialist?
To go to high school
Would you travel farther to go to elementary school or to go to high
school?

How big is the trade area of a service center?
It depends on . . .
How far a consumer is willing to travel for the
service
How many customers a service needs

• The three principles in the arrangement of the central
places
• Christaller noted three different arrangements of central places
according to the following principles:
1. The marketing principle (K=3 system)
2. The transportation principle (K=4 system)
3. The administrative principle (K=7 system)

The Marketing Principle (K=3 System)
K=3 Marketing Principle favors the development
of symmetrical nested hierarchy of central places.
According to this principle, the rural production
coms to the higher order centers through lower
order centers and the goods or services produced
in urban area move through higher order centers
to the lower order centers.

The number of centers increase as
1; 1x3=3; 3x3=9; 9x3=27; 27x3=81
and so on. (Geometrical Progression)
K=3 gives the best choice for shopper.
It minimizes the number of services
centers needed to serve the whole
Population.

Christaller proposed that settlements with
low order of specialization would be equally
spaced and surrounded by hexagonal shaped
service areas or hinterlands.
For every six of these lowest order settlements,
he suggested there would be a larger and more
specialized settlement which in true would be
situated at an equal distance from other
settlements of the same order and also
surrounded by hexagonal service area.
Progressively, more specialized towns with even
larger hexagonal shaped hinterland would be
similarly located at an equal distance from each other.

Transport Principle K=4 Principle
Christaller pointed out that the marketing
principle is an awkward arrangement in
terms of connecting different levels of hierarchy.
As an alternative arrangement, the central
place could be organized according to what
is called as transport principle.
The distribution of central place is most favorable
when as many important place as possible lie on
one traffic route between two important towns,
the route being established as straightly and as cheap as possible.
The more unimportant place may be left aside.

According to the Transport Principle, the central places would thus be
lined up on straight traffic routes which fan out from the central
point.
The lower order centers are located at the midpoint of each side of
the hexagon rather than at the corner.
Thus the transport principle produces a hierarchy organized in a K=4
arrangement in which central places are nested according to the rule
of four.
In transport principle, the number of centers followed the
geometrical progression as 1,4,16,64……………………
Shoppers in smaller settlements divide into two equal groups when
shopping in the two nearest larger settlements.

The administrative principle (K=7system).
Christaller other suggested organizing
principle which was based upon the
realization that from a political or
administrative viewpoint centers it was
unrealistic for centers to be shared.
Any pattern of control which cuts through
functional units is potentially problematic.
Christaller suggested that an arrangement
whereby lower order centers were entirely
with the hexagon of the higher order center
would obviate such problems.

Such a pattern is shown in the diagram. All the six lower order
centers are fully subordinate to the higher order center which,
therefore, dominates the equivalent of seven market areas at
the next lowest level.
At this level one bigger central place serves the seven second
order centers and so on as 1,7,49,343……… In areas of perfect
transport development the K=7 progression of central place
comes true
All the shoppers in the smaller settlements shop In the nearest
large settlements.

Results of three principles in the arrangement of the central
places
Large settlements are few
Large settlements far away, as size
of settlements increases, distance
increases
Range and number of functions
increases with size of settlements
Number of higher order services
increases with increase in size of
settlements

Application of Central Place Theory in Regional Planning
It guides the planner in identifying the existing hinterlands of
localized or mobile services.
It helps in identifying the planner which areas and which people
are out of reach of individual service center.
it shows the planner which centers are stranger in terms of
available services and so they could cater the needs of an increased
local demand or for a demand in a larger hinterland.
It helps to recognize the central place in such a way that a
combined hinterlands over all the people in an area.
It enables a comparative analysis of regional to be made

A hierarchy of functions and settlements is devised.
It shows the inter dependence of towns and regions.
The idea of competition between centres may be
emphasized.
The intensity of spacing of centres suggests further
investigation as to how these service centres have evolved
and changing their character at present time. And
On the basis of a theoretical structure it is possible to make
a number of predictions about the pattern of future
settlement location.

Critical Assessment of Central Place Theory
Evaluation: There can be no question of denying the fundamental
importance of Christeller’s work. For the first time this theory has got
lots of clapping because it was the ideal blue print to arrange and
rearrange the settlements but latter on this theory faced some
criticisms:
The pattern of cities predicted by central place theory may not hold
because of the failure to meet initial assumptions.
Hexagonal arrangement of settlement is theoretically justified but
practically it is not approved.
Isotropic surface over an extensive area as assumed is quiet
abstract.

According to Christaller people purchased the goods and services to the
nearby market but today peoples have high economic and social status so
they are much interested to for developed cities to enjoy better services.
For instance concept of E-Marketing....
Concept of the threshold population is quite impractical because the
surplus production of any centre to day is not only dependent on local
market. It is now very much easy to export the surplus to the regional or
international market.
. Equal taste, same kind of purchasing power parity are also not uniform
for all the peoples of all the centres. So, same category of demands for
goods and services is also not realistic.
Production costs may vary not only because of economies of scale but also
by natural resource endowments (i.e. not a homogeneous plain)

Transportation costs are not equal in all directions.
Rural markets (initially households) are not evenly distributed.
Non economic factors (culture, politics, leadership) may be important
but not evenly
distributed
Range of distance to day is not very much justified concept when a
production centre may able to reduce down its cost of product using
technologies. So zonal overlapping, market occupancy may be
happened which in turn create turbulence in the general pattern of
Hexagonal settlement geometry.

Modification of Christaller’s Theory:
In 1954 the Economist August Losch presented an important
modification of Christaller’s theory, he again used hexagonal service
areas, but allowed various hexagonal systems to co-exist.
In Losch Model the various hexagonal systems, K=3, K=4, K=7 and
others, operate at different levels and are superimposed on each
other.
The application of a variable K value produces a continuum of
settlements sizes more closely in line with the theoretical result of the
Rank-Size Rule.

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