Chapter Nine

Livelihood And Economy: From Blue Collar to Gold Collar

– Principles/considerations guide manufacturing locational decisions, how these considerations incorporated in theories

– Tansnational corporations affect classical locational control

– High-tech influences in older world patterns of manufacturing regions

– Characteristics of tertiary, quaternary, and quinary service

Components of the Space Economy

• The set of simplifying assumptions and controls explaining the structure of the space economy include economically rational agents heeding the guidance of the market mechanism in reaching correct economic decisions. Price, supply, and demand establish market equilibrium, an abstraction geographers refine by recognition of spatial variations in demand and in production costs. Behavioral traits may modify but do not erase economically rational decision making.

• Concepts and Controls - people of economically rational: make decisions based on the cost-effectiveness. Maximizing profit is the driving force for human behavior about products, price and market location.

• Market Equilibrium (fig 9.2)

Primary industries tied to the natural resources

Concepts and Controls• Distance decay - the intensity of spatial interaction decreases with

increasing separation of places (3.4), Human being are economically rational - to make cost-effective decisions - is intent on maximizing profit.

• Market mechanism - measured by price, which is a function of supply and demand.

• “the higher the price of a good, the more of it will be offered in the market” (the supply curve in 9.2a)

• “the lower the price of a good, the more attractive to customers” (the demand curve in 9.2b)

• Market equilibrium - where the supply and demand curves meet (decides the price of goods, the total demand, and the quantity bought and sold)

• Spatial decisions based on the supply, demand, and equilibrium price.

Secondary Activities - decisions in manufacturing

• Involve transforming raw materials into usable products, giving them form utility.

• On the demand side - distribution of pop, of purchasing power.

• On the supply side - costs of raw materials, distance from them and from markets, wages of labor, outlays for fuel, capital availability and rates.

• Secondary activities are the applications of power and specialized labor to the production of standardized commodities in factory settings.

Principles of Location - their relative weight varies among industries and firms.

• 1) some of the input cost are spatially fixed, which have no implication for comparative locational advantage.

• 2) others are spatially variable costs (9.3)

• 3) the ultimate aim of the economic activity is profit maximization, when the plants are situated at the least total cost location. Considerations of sales and market may be more important than production coast in fixing “best” locations.

• 4) fixed cost is not as important as the variable cost, the minimization of variable costs is the major spatial decision factor

• 5) Transportation charges are highly variable costs,, may become the locational determinants

• 6) agglomeration process - linkages brought industries together for common resources

Raw Materials - the more advanced the industrial economy of a nation, the smaller is the role played by true raw materials in its economic structure

• Material Orientation - copper smelting and iron ore beneficiation (scalping, sizing. logwashing, screening, cycloning and dewatering),pulp and paper, sawmills, fruit and vegetable in CA, meat packing in midwest.

• Multiple raw materials - decisions based on minimizing total cost (9.4) Gary and Cleveland

• Power Supply - early textile mills located near sites with available fuel (initially charcoal, later coking coal), Alumina production relies on electrical power - examples Kitimat plant on west coast of Canada and Lake Baikal in Siberia