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Losch's Model

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Juhi Choudhury

on 22 April 2013

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Transcript of Losch's Model

Lösch's Model:
The Location Theory Origin and Meaning of the Model - The original central place theory was developed by German geographer Walter Christaller in 1933.
- Christaller's theory was modified in 1954 by German economist August Losch, as he believed it too rigid.
- Christaller's model led to patterns where distribution of goods and accumulation of profit was entirely dependent on transportation and location.
- Losch's modification instead focused on creating an ideal environment for consumers and maximizing consumer welfare, in that the need to travel to receive goods was minimized and profits were held level, rather than being inflated to earn extra. How the Model Works - Losch's model itself consists of superimposed hexagons in a pattern around a capital or central city.
- Hexagons display the land around companies in order to determine at which location the population would have the lowest cost.
- Where these hexagons intersected, smaller locations could be built in order to maximize the profit that each company received.
- Losch chose hexagons over circles in his model because hexagons can tile a plane while circles cannot.
- From any capital or large city, a cone emanates from it
- The location where 2 cones meet forms the boundary where the population is divided and the plane is then tiled according to these intersections to show the region in which a central city can create profit.
- The model described above would represent only one product or demand, and in the case of multiple demands, more hexagonal fields can be constructed in a similar way to illustrate the varying demands for a product. The Model Modern-day Examples California Giant Berry Farms - A company based out of Watsonville, California
- Area in which berries (especially blackberries and blueberries are native plants
- Production cost is cheap and they can be transported over a large region
- Individuals living in California receive relatively large incomes and can therefore afford goods that are not necessities. Central London - Multiple firms have been constructed throughout the city as a result of a demand for trade.
- Because various locations of productions are not evenly spaced, the varying distribution causes areas of high firm density.
- Often, the situation gives rise to new cities.
- Certain sectors are more urban (city-rich) than others (city-poor). Location Theory Assumptions - Isotropic plane: the areas being observed would be flat, so no barriers would exist to impede people's movement across it
- Identical preferences among population: people will always purchase goods from the closest place possible
- Evenly distributed population
- Consumer pays cost of shipping
- People act economically rationally Vocabulary Terms - Location theory: an attempt to explain location patterns of economic activity
- Supply chain: a system of activities used to move a product or service from supplier to customer (through the shipping, selling, transporting, and preserving of goods) that transcends locational boundaries
- Shelf life: the length of time that perishable food items can be preserved before they are considered unsuitable for sale, use, or consumption.
- Threshold: the minimum market needed to sell a good or service
- Range: the maximum distance consumers are prepared to travel to reach a good or service
- Spatial margin of profitability: the distance from a factory where costs are equal to revenue (no profit or loss is made)
- Variable costs: expenses that change in proportion to business activity; if a manufacturer is in a faraway, remote location, the price of transportation will increase; with high activity, production costs increase, but revenue overcomes this cost
- Agglomeration: clustering of people or activities. When factories are located in developed metropolitan cities with high demand, income will increase as well as business; this interconnectedness provides industries with easy access to consumers and resources to maximize profit
- Deglomeration: industrial deconcentration in response to increasing costs or technological advances due to competition.
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