Geography Reference
In-Depth Information
and
p
3
on the optimum location decision, although we will return to this
issue shortly. At this point we will instead concentrate on the effects of dif-
ferences in the values of
m
1
,
m
2
and
m
3
and the impacts that these have on
the optimum location
K
* of the firm.
In order to explain this, we can adopt a hypothetical set of examples.
We can imagine that the Weber location-production model in Figure 3.2
represents the case of a firm that produces automobiles from inputs of
steel and plastic. We can consider that the output good 3 is therefore
defined in terms of automobiles and these are sold at the market point
M
3
.
Now we can assume that input 1 is steel and input 2 is plastic, and these
are produced at source locations
S
1
and
S
2
, respectively. Let us assume
that the automobile manufacturing firm produces a car weighing two
tonnes from one tonne of steel and one tonne of plastic. The relation-
ships between the total weight of the final car which is produced and the
specific weights of the steel and plastic required in order to produce each
car represents the production function coefficients, described in equation
(3.1) above. If the fixed transport rate per tonne per kilometre for steel
t
1
is half that for plastic
t
2
- given that plastic is much less dense and bulkier
than steel and therefore more expensive to transport - the automobile
manufacturing firm will locate relatively close to the source of the plastics
production
S
2
. The reason is that the firm will wish to reduce the higher
transport costs associated with shipping plastic inputs relative to shipping
steel inputs. The firm can do this simply by reducing the value of
d
2
rela-
tive to
d
1
, the result of which is that the firm moves closer to
S
2
. On the
other hand, if the automobile manufacturing firm had a different produc-
tion function, such that it produces a car weighing two tonnes from 1.5
tonnes of steel and 0.5 tonnes of plastic, then even with transport rates
t
1
for steel which are half that of the transport rate for plastics
t
2
, the auto-
mobile manufacturing firm will now be incurring higher total transport
costs associated with steel shipments. The reason for this is that although
a tonne of plastic is twice as expensive to transport per kilometre as steel,
the total quantity of steel being shipped is three times that of plastic. If
the shipment distances for the two inputs are identical, in which case the
firm would be equidistant between
S
1
and
S
2
, the total transport costs on
steel would be 1.5 times higher than the total transport costs of plastics.
In order to reduce its total transport costs, the automobile manufacturing
firm can reduce the value of
d
1
relative to
d
2
by moving closer to the source
of the steel inputs
S
1
. The optimum location of the automobile manufac-
turing firm will therefore now tend towards the location of production for
the steel input
S
1
. Within the Weber framework, this argument allows us
to consider the locational effects on the firm of having different produc-
tion function relationships.
