Assignment on What is Economic and it's Importance?

ECONOMICS
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Essay 1
Noteworthy, geographical economics is the study of where and why
business is located where they are. There are various theories seeking to explain this
pattern of businesses. Namely,the agglomeration,theory of the firm ,central place theory
and location theory.Specifically,the location theory is linked to the industrial location
theory and extrenalities theory while the agglomeration theory is likned to the economies
of scale concept.Alongside the above theories, endogenous and exogenous forces are
partly responsible for the strategic geographical locations. Whereas endogenous forces
imply internal forces that influence the location of businesses exogenous forces refer to
the external forces influencing the business location.Overall,the location of firms can be
explained through the theories listed above.
Primarily, the agglomeration theory dictates that businesses preference
for a location near other established firms (Potter 2010).The agglomeration concept is
influenced by economies of scale and the cluster of economic
activities.Also,agglomeration provides market access and labor which are key to the
success of a business. Based on this theory, business costs of transport and labor reduce
significantly in the case that business are located together. However, the agglomeration
has negative consequences. Specifically, agglomeration can result in diseconomies of
scale in the case of congestion, high property prices, overburdened physical infrastructure
,high levels of competition(Glaeser 2010).Further, agglomeration is responsible for the
increasing rate of inequality among urban centres themselves and rural areas.This is
because some areas will have more firms than others(Tabuchi 2011).

Essay 2
Based on the below figure,industrial consistencies of firms are relatively
consistenc across the four Australian cities.This goes to show that similar firms choose to
operate within the same geographical area.
Office locations by sector across four Australian GCCSA’A Martinus 2017
In addition to the agglomeration theory, the strategic location of businesses in
close proximity can be explained by the location theory This theory was first articultade
by Von Thunen, Weber and Christaller among other authors. Basically, the location
theory is focused on the reason behind the geographical location of economic activities.
This theory is accurate in its assertion that businesses are likely to choose strategic
locations so as to maximize profits. According to the industrial Locations theory, as
explained by Weber,transportaio costs playa key role in geographical location of
businesse.To this extent,Weber’s sentiment was accuract in the sense that in order to
maximize profits companies are likely to choose areas with better infrastructure so as to
reduce costs.Another vital aspect of the location theory is the locational figure.
Simply,the locational figure denotes the proximity of raw material for
companies.Weber’s assertion was that industries consider location based on easy access to raw

Essay 3
materials which is practically true. However.Weber’s location theory sentiments are questioned
on the grounds of not all companies incur low transportation costs by choosing a location similar
to other businesses. Interanl business factors might lead one firm to incur more business costs
that other firms doin the same business in the same location.This opens the door to other factors
such as low costs of labor as part of the reasons similar businesses are located in a certain
geographical area. One of the reasons for choosing an agglomerated location might be readily
available raw materials and cheap labor(Siler,Serle & Martinus 2017).
Basically,Weber’s theory of industrial location is hinged on low transport,labor and
economics of agglomeration.Furtherr,Weber’s theory is considered deductive in
nature.Specificallly,the theory fails to explain why management costs are excluded(Potter &
Watts N.d)Basically, the theory of the firm recognizes the profit maximization a key reason for
the existence of firms.In an effort to maximize their profits,firms might be influenced to locate
in areas with similar businesses locations with close access to raw materials to reduce costs and
in the process maximize profits.However,this theory is criticized for running the risk of poor
public perception and good will loss among potential investors,consumers and the public.There
is more to firms objectives than profit mazimization.Such as social corporate
responsibility.However,profit maximization remains the major reson for the existence of firms
Further,the distribution of business in different locations can be explaced by the central
place theory.It is a form of location theory which seeks to explain the size and distribution of
places considered central.Based on this theory,businesses are considered higher order central
places.Based on this theory firms need a place that supports their business hence urban centers
provide that populationthreshold.This might explain the clustered location of businesses in the
urban centres as compared to rural encironment. In the urban areas, business get to enjoy ready

Essay 4
market,access to labour due to hue labor pool and existin physical infrastructure.This makes
sens for businesses to set up shop in urban areas. .However,this theory is criticized for it static
nature and failure to incorporate temporarity in the development of places considered central.
Also, the existence of economies of scale in a certain geographical area is an incentive for
companies to choose a certain geographical location over another(Monga 2018). Essentially,
economies of scale imply efficiency experienced by firms due to low production costs.In the case
that business is clusterd together and are in the same geographical area,in the long run production
costs become lower hence maximum benefit for companies(Legros,Dube & Brunelle
2016)..Whereas economic of scale might explain the location of certain business ventures,it has
some setbacks.Through the extrenalities theory,the location of businesses can be explained.With
external economies of scale such as specialization,average production costs have the potential to
lower in the case that busineese are located in the same geogrpahicl setting(Segal 2019).
Usually,business that conducts same business tends to cluster together due to the
specialization of labor and existing infrastructure hence reducing the business costs and
maximizing the profits of businesses in the process).There exist endogenous and exogenous
factors that determine the location of businesses.Examples of such endogenous factors include
transporation costs,existence of local amenities while exogenous factors include barriers to
trade,institutional factors and natural factors.Overall,the existence of exogeneous and
endogeneous factors reinforce some of the theories bein fronted here such as the agglomeration
theory.Overall,all these theories provide a reason for the establishement of firms in different
areas .However,no single theory is self sufficient.

Essay 5
References
Glaeser, L.E. (2010).Agglomeration Economics.Nber.Org. [Online].Available at
https://www.nber.org/chapters/c7977.pdf[Accessed 7 Oct 2019]
Legros,D, Dube,J & Brunelle,C.(2016).Locationa Theories and business location decision: A
micro-spatial investigation of a nonmetropolitan area in Canada. Research Gate.
[online].Available at
https://www.researchgate.net/publication/320036229_Industrial_Location_and_Global_Restruct
uring_in_Australian_Cities[Accessed 8 Oct 2019]
Matinus,K.(2017).Office locations by sector across four Australian GCCSAs.
[Image).Reserchgate.[Online].Available at https://www.researchgate.net/figure/Office-
Locations-by-Sector-across-four-Australian-GCCSAs_fig1_320036229[Accessed 8 Oct 2019]
Monga, C. (2013).Theories of Agglomeration. Springer.[Online]Available at
https://www.google.com/search?
q=criticism+of+the+agglomeration+theory&oq=criticism+of+the+agglomeration+theory&aqs=c
hrome..69i57.7950j0j7&sourceid=chrome&ie=UTF-8
Potter, A & Watts, D.H. (2010).Evolutionary agglomeration theory: Increasing returns,
diminishing returns, and the industry life cycle. Journal of Economic Geography, Vol 11 Issue
3,417-455
Segal, T. (2019).External Economies of scale. Investopedia.[Online].Available
athttps://www.investopedia.com/terms/e/externaleconomiesofscale.asp[Accessed 7 Oct 2019]

Essay 6
Sigler,T,Searle,G & Martinus,K.(2017).Industrial location and global restructuring in
Australian cities.ReserchGate.Net.[Online].Availableat
https://www.researchgate.net/publication/320036229_Industrial_Location_and_Global_Restruct
uring_in_Australian_Cities[Accessed 8 Oct 2019]
Tabuchi,T & Thisse,F.J.(2011).A new economic geography model of central cities. Journal Of
urban Economics 69 ,240-252