Weber's Least Cost Theory
By- Kaylea King
The Least Cost Theory
The Least Cost Theory is a model developed by Alfred Weber according to which the location of manufacturing establishments is determined by three critical expenses: transportation, labor, and agglomeration.
Transportation
Weber wanted the lowest cost of moving raw materials to the factory and finished products to market.
Labor
If a factory was located farther from raw materials and the market, Weber thought that cheap labor could make up for added transportation costs.
Agglomeration
While it is not a good thing to have excessive agglomeration, Weber thought that if a large number of enterprises clustered in the same area, then they could provide assistance to each other through shared talent, services, and facilities.
Bulk Reducing/Gaining Industries
Bulk-Reducing Industries- A production where the import weighs more than the final product. To reduce costs bulk reducing industries needs to locate near its source of inputs.
Example- Copper Production has four steps and the first three steps are to reduce the size of the final product.
Example- Paper production uses large trees to create thin sheets of paper.
Bulk-Gaining Industries- Industry that makes something that gains volume or weight during production. The finished product weighs more than the raw materials.
Example- Beverage Industries receive the empty bottles that they fill up with drinks, so the finished product gains weight.
Example- Auto production takes the separate parts that make up cars and combine them to create a car.
Example- Copper Production has four steps and the first three steps are to reduce the size of the final product.
Example- Paper production uses large trees to create thin sheets of paper.
Bulk-Gaining Industries- Industry that makes something that gains volume or weight during production. The finished product weighs more than the raw materials.
Example- Beverage Industries receive the empty bottles that they fill up with drinks, so the finished product gains weight.
Example- Auto production takes the separate parts that make up cars and combine them to create a car.