Supply/Demand and the theories of location
Economic theories of supply and demand provide a clear indication of the effectiveness of free markets in the allocation of land resources. Changes in the costs associated with accessibility have resulted in a free market move of population away from traditional city centres.
With reference to concepts of location, and specific to TWO cities known to you, describe the process of decentralisation and explain why such free market moves may be resulting in longer term planning difficulties.
For businesses, there are many costs and benefits of the single market (Sloman, 1998). One of these is location. Firms are likely to locate either near sources of supply or the centre of their markets. This essay will discuss how changes in accessibility have lead to population movement. Showing concepts of location and then relating them to two cities will do this: Edinburgh and Glasgow. The aim will be to show decentralisation and then how long term planning is affected. The conclusion will sum up the author’s viewpoint as well as the key points of the essay. To begin with, the essay will touch on supply and demand before going on to discuss demand theories of location.
Supply concerns resources and is therefore limited to what is available (Sloman, 1998). It is counteracted by demand that is related to ‘wants’ and is practically limitless and boundless. All current economics are based on supply and demand and economics is the basis for survival of cities in the areas they exist.
Nevertheless, market barriers affect supply and demand curves. Market mechanisms also help ensure demand and supply equilibrium. Market elasticity provides a concept of need against choice and some markets react more quickly than others do.
Demand elasticity is affected by several factors: — percentage change in demand to price, Necessities versus discretion, Impact of good or ability to substitute, requirements for perfect competition, monopoly and oligopoly and market control. The steepness of the demand curve reflects the willingness and ability of the consumer.
There are about five main theories of location. The first is the Von Thunen model. Von thunen suggested that farmers near a market would tend to grow crops expensive to transport, whereas farmers further away would tend to produce lighter crops. Therefore, the location of land has a significant factor to what it produced. Different crops possess different rent gradients. Perishable crops (e. g. vegetables) have steeper curves than less perishable crops (e. g. wheat).
A second theory is attributed to Weber. He established that heavy goods would be produced nearer the market, whereas lighter goods are produced nearer the raw materials.
Both theories assessed transport costs as the main factor in influencing location. However, five other factors have since been identified in determining location: the first is monopoly power, second is gaining economies of scale in the area. A third is the influence of utility maximising behaviour — is it pleasant here. Another is the possibility of grants and subsidies, and finally, the influence of taxation and infrastructure.
Weber’s location triangle seeks optimum location in the production of a good, based on the fixed location of more than one raw material. Forming a geographical triangle. Least-cost production location in the triangle is the function of the total costs of transporting raw material from both sites and then from the production site to the market. the weight of both the raw materials and the final commodity are important in determining the location of production and transport costs. Commodities that lose weight during production tend to be built nearer the raw materials.
A third model is the Alonso Intra Urban model. This model applies the accessibility requirements to the city centre for various types of land use. each has its own bid rent curve.
Each curve sets a maximum value of rent any land use will yield in a specific location.
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