Weber's Least Cost Theory

by Anthony and Ashlyn

WHAT IS IT?!

A theory specifying the effects of certain factors on the location and success of businesses.

1. Transportation- the ability (cost wise) to move a product

2. Labor- the sum cost of using human beings to produce the product

3. Agglomeration- the ability to be interdependent between corporations

BULK-REDUCING AND BULK-GAINING INDUSTRIES

Bulk-Reducing Industries: when corporations locate themselves near raw materials to lower the cost of transporting those materials


Bulk-Gaining Industries: when corporations locate themselves near markets allowing for increased sales of their products

EXAMPLES OF BULK-REDUCING INDUSTRIES

EXAMPLES

1. Heavy metals such as steel for guarding fences

2. Metals such as copper


REASONING

Both of these examples are extremely expensive to transport so the factories are located nearby as to lower transportation costs.

EXAMPLES OF BULK-GAINING INDUSTRIES

EXAMPLES

1. Soft drink companies

2. Produce companies


REASONING

Both of these industries are focused on selling to markets and need to be close to them so that they make more profit and diminish cost for transport to the markets.