Sample Essay
Production of maize requires a certain amount of a certain quality of land, agricultural machinery, chemicals, climate, etc. (Porter 1990 ) Thus, some places are better suited for corn production than others. Factors of production can not be substituted for each other. (Porter 1998) For example, improved farm machinery can not substitute for scarce land to grow corn in the big city.
Demand for products is separated from the production or supply of products
Corn producers want to put the money they earn from agriculture in the banks in the cities. Bankers in the cities want to consume agricultural products. Thus, transport costs influence where goods are produced. If bothIowaandNebraskahave the same amount of corn production inputs, (Oxley 1998) but in most cases, the demand for corn inNew York City, other things being equal, shorter distances,Iowa,New York,Iowais the best place for the production of bread.
Factors of production are immobile
New Yorkers can not import cheapIowaland for growing corn on the ground, and Iowans can not import the bankers inNew York. Although some factors (capital, migrant workers) really mobile, (Oxford Review of Economic Policy Trade and Location 1998) land and natural resources, most are not. Theories based on assumptions of a clear prediction that in order to minimize production and transportation costs, certain places will specialize in the production of certain goods and services and “export” (Ottaviano 1998) of these goods to other places.
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