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Plannng 3 Nfographcs

David Ricardo developed theories of labor value, rent, and comparative advantage. Alfred Weber built on von Thunen's theory of industrial location by considering transportation costs of inputs and outputs. He established that industries producing lighter final goods locate near raw materials, while heavier industries locate near markets, to minimize transportation costs. William Alonso extended von Thunen's model to urban land uses, postulating an inverse relationship between transportation costs and rent.

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9 views2 pages

Plannng 3 Nfographcs

David Ricardo developed theories of labor value, rent, and comparative advantage. Alfred Weber built on von Thunen's theory of industrial location by considering transportation costs of inputs and outputs. He established that industries producing lighter final goods locate near raw materials, while heavier industries locate near markets, to minimize transportation costs. William Alonso extended von Thunen's model to urban land uses, postulating an inverse relationship between transportation costs and rent.

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angel hofilena
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Location theorists:

David Ricardo (19 April 1772 – 11 September 1823)

was an English political economist, and was one of the most influential of the classical economists.

His most famous work is his Principles of Political Economy and Taxation, wherein he discussed his
theories on labor value, rent and comparative advantage.

- known for his differential rent theory based on fertility but he also gave "situation" as a
possible cause of rent.

“If all land had the same properties, if it were unlimited in quantity, and uniform in quality, no charges
could be made for its use, unless where it possessed peculiar advantages of situation”.

- Economic rent: the difference between the produce obtained by the employment of two equal
quantities of capital and labor : the payment over and above what is necessary to stay in
business

Alfred Weber (30 July 1868 – 2 May 1958),

a German economist, sociologist, and theoretician of culture.

Works were influential in the development of modern economic geography.

- Author of Theory of the Location of Industries, studied industrial location decisions, and built on
von Thunen’s theory by considering not only the costs of getting goods to market, but also the
costs of transporting material inputs to the manufacturing plant. Considered Transportation
cost as the direct function of the weight of the item and distance shipped.
- He asserted that “all else being equal, manufacturers will locate their plants either at the market
or the source of the input depending on whether or not the final product gains weight or loses
weight in the manufacturing process”.
- Formulated a theory of industrial location in which an industry is located where the
transportation costs of raw materials and final product is at a minimum (least-cost location).
- His model allowed for three types of locations:
- (1) raw materials locations
- (2) a production site for final goods
- (3) a consumption center.

Weber’s Weight-Losing Case - The weight of the final product is less than the weight of the raw material
going into making the product.

- Transportation cost for the product delivered to the market will be lowest of all if the
processing plant is located at the source of the raw material.

Ex. Pencil – wood

Weber’s Weight-Gaining Case - The final product is heavier than the raw materials that requires
transport.

- The optimal location of the processing plant in this case is at the market.
- Transportation cost for the product delivered to the market will be lowest of all if the
processing plant is located at the market.

Weber established that firms producing goods less bulky than the raw materials used in their production
would settle near the raw-material source.

Firms producing heavier goods would settle near their market. The firm minimizes the weight it has to
transport and, thus, its transport costs.

William Alonso

Extended the von Thünen model to urban land uses.

- His model gives land use, rent, intensity of land use, population and employment as a function
of distance to the CBD of the city as a solution of an economic equilibrium for the market for
space.
- He postulated that there is an inverse relationship between transportation cost and rent such
that if transportation cost is high, then the rent is low
- He developed the "Bid-Price Curve": A set of combinations of land prices and distances among
which the individual is indifferent (i.e. satisfied with the combination of land price as well as the
distance at some point).

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