Urban economics - Essay Example

Right from the time human beings have started inhabiting in the caves, they have been analyzing the effectiveness of various locational decisions. It includes factories, retail outlets, warehouses, hospitals, bus stops, educational institutes, automobile stations; just to name a few of them. This ubiquity of locational designing has led to the interest of many in locational analysis. P-median model is the most popular and most widely used location-allocation models. (John Current, Mark Daskin and David Schilling, n.d.)The idea of conditional location problem is to locate the p amount of facilities in order to serve a particular set of demand points, assuming that q facilities are already located.

When q tends to zero, there is unconditional problem. In case of conditional p-median or p-center problems, once the new p locations are determined, demand can either be served by the existing facilities or the new facilities, depending on the facility that is in high demand. P-median along with p-center are the most common used models in the locational analysis. Each application to the p-median or p-center problems turns to the conditional model, when there are already existing facilities in the given area.

As for example, if anybody wishes to locate p number of warehouses in a particular area, it is denoted as an unconditional p-median problem. . Each application to the p-median or p-center problems turns to the conditional model, when there are already existing facilities in the given area. As for example, if anybody wishes to locate p number of warehouses in a particular area, it is denoted as an unconditional p-median problem. When there are q number of warehouses already existing in that particular area and p number of warehouses is to be added, then it is denoted as conditional p-median problem.

(Oded Berman and Zvi Drezner, August 2007)Median Location Model is based on a few assumptions; the inputs required by the firm exists everywhere, the consumers buy fixed amount of goods and the consumers are distributed along a line, the marginal cost of transport is constant and the firms usually make separate trips for the customers. The firms minimize transport cost by locating at the median of the customer distribution line. As for example, pizza firms make a number of trips in order to serve the customers at various locations.

Plants are not created at each and every place in order to reduce the production cost as well as the cost of shipping input to all the locations. Instead, if the firm is situated at the median location, it will lower down the cost of production and it can also serve the customers. Moreover, producing from more locations does not allow the firms take advantage from scale economies. Per unit costs of the production also decreases with the increase in the size of the firm, as Average Cost of Production is equal to the Total Cost of Production divided by the Output.

Weight Losing / Gaining Location Model:Alfred Weber formulated an industrial location theory, and according to the theory, an industry is located in such a place, where