Webers Least Cost Theory
By: Jacob and Kim
Description of Webers Least Cost Theory
Accounted for the location of a manufacturers plant in terms of cost.
-Transportation: Site chosen to have the lowest cost of transportation moving to factories and market places.
-Labor: High labor reduces profit. Therefore cheaper labor will increase the profit made by the factory, better benefiting it.
-Agglomeration: Where multiple enterprises cluster into the same area. They can all provide assistance to one another which is the reasoning for clustering together
Description of Bulk- Reducing and Bulk- Gaining
-Bulk- Reducing: When the product coming out of a factory weights less then the raw materials used to create it
-Bulk- Gaining: When the product coming out of a factory weighs more than the raw materials put into it
2 Examples of Bulk- Reducing
-North American Copper Industry (Woodbook example)
-Meatpacking (Original example)
These are both examples of bulk- reducing because the finished product weighs less than the raw materials put into it. The meat is cut into portions and sold in chunks, of the animal it originally came from making the finished product weigh less. The same concept goes for the North American Copper Industry.
They both relate to Weber's theory because since the products are smaller and its easier to transport smaller items due to cheaper cost, bulk-reducing industries need to be close to the raw materials, seeing as they're larger than the output, more so than the market or place they transport it to.
2 Examples of Bulk- Gaining
- Canned food/ beverages (Woodbook example)
- Automobile Industry (Original example)
These are both examples of bulk- gaining because the finished product weighs more than the raw materials put into it. The parts of an automobile are small but once put together, it makes a running car in which is the end product. The car weighs much more than the individual parts to create it, making it bulk- gaining. The same concept goes for Canned food/ beverages.
They both relate to Weber's theory because since the products are larger, transportation costs will be higher than it would for smaller items. Therefore this means a bulk- gaining industry needs to be close to the market or place of transportation more so than that of the raw materials. Smaller objects are cheaper to transport, making it more beneficial for this type of industry to do so.