Weber Least Cost
Theory
1.Assumption
 Isotropic
plain
 Four types of resources : ubiquitous,
sporadic, pure and gross
 Wages are fixed at any particular location
 One market
 Uniform transport system
 Perfect competition
Weber suggested that manufacturing firms
would locate in response to three factors:
 Transport
cost
 Labour cost
 Agglomeration economies
II. Least Transport Cost Theory
 Procurement
cost : cost of transporting
raw material to factory
 Distribution cost : transportation cost from
factory to the market
 Total
Transport Cost : P+D
 When
Procurement cost > distribution cost
→ material location
 When
distribution cost > procurement
cost→ market location
 When
distribution cost & procurement
costs are of equal importance → footloose
location
A. One market and one raw material
B. One market and two raw materials :
(i)
(ii)
(iii)
Two raw materials required but both do
not loose weight
Two raw materials are sporadic
Two raw materials are found at fixed
locations, both undergoing weight loss
For two or more raw material :
 1.
Material Index = weight of localized raw
material / Weight of finished product
→raw material (weight added)
 <1 →market (weight reduced)
 =1 →footloose (anywhere in between)
 >1
Isodapane Method
Procedure :





The source of Rw and M is plotted
Plot lines of equal transport cost (isotims)
around each Rw source and market point
Total the sum of isotims at the intersection points.
This shows the total transport cost if the factory
is located at that point
Finally connected the intersection with equal
totals through the use of isodapane lines
The minimum value isodapane reveal the ideal
factory location
III. The effect of labour cost
 Weber
also recognized that at some
locations, the labour cost was cheap
enough to offset the increase in transport
cost from the least cost location
IV. The effect of Agglomeration Economies
 Industrial
firms can lower its total cost of
production by agglomeration themselves
at the same locality gaining external
economies.
Comment on Weber concept :
Merits :
 clear
analysis on factors affecting
industrial location
 Brought
forward the concepts “least cost
location”, “ material index”
Demerits :
 Least
transport cost theory : transport, raw
material become less important nowadays
 Least
labour cost : skills of labours more
important than cost of labour
 Agglomeration
of economics : concept
correct but changed to global
agglomeration
 Focus
mainly on economic factor, ignore
behaviour factor ,people can be
satisficers > economic men
 Cannot
foresee the importance of certain
locational factor : technology, government
 Cannot
foresee the decline of certain
factor : raw material, transport