Economic Geography: Agriculture, Industry, Services and Locational Change
What this domain tests
The exam asks why economic activity sits where it does and how that location changes. You should be able to move between the classical location theories, the conditions of German agriculture (including EU subsidy logic), and the de- and re-localisation of industry and services.
Core rules and concepts
- Agricultural location: von Thünen's model places land use by rent intensity relative to distance from market, given uniform soil, transport cost proportional to distance and weight, and a single market. Perishable, heavy, high-value products lie near the market. Modern reality complicates this: refrigerated transport, subsidies, and global sourcing break the concentric pattern, but the logic of land rent still explains intensity gradients.
- Industrial location: Weber's least-cost triangle weighs transport-oriented, labour-oriented and agglomeration-oriented locations. Today, production is fragmented along value chains; comparative cost advantages, logistics hubs, knowledge spillovers and institutional quality drive decisions. Ports (Hamburg) concentrate refining, logistics and trading functions.
- Services and change: services are typically produced and consumed locally (uno-actu principle), so proximity to clients matters; but digitalisation enables remote delivery and centralises some functions in high-wage metros. High-order services cluster in agglomerations; routine services follow population.
- Theories of uneven development: growth poles and cumulative causation (Myrdal) explain core–periphery persistence via backwash and spread effects. Regional policy in Germany combines GRW investment incentives, infrastructure funding and the Solidarity pact legacy, aiming to counter periphery decline.
- Structural change: tertiarisation, deindustrialisation, and the rise of logistics and the creative economy; peripheral rural areas may keep agriculture but lose services and jobs, driving out-migration.
Worked example with reasoning
Task: explain why a mid-sized town in Schleswig-Holstein lost its grocery stores while retaining a dairy-processing plant. Reasoning: retail is a low-order service with a threshold population; when mobility increases and a larger centre offers lower prices and wider assortment (range of a good), local demand falls below threshold and shops close. Dairy processing is tied to perishability and bulk transport, has high fixed costs and cooperatively organised supply, and benefits from EU market regulation and regional milk collection. So services follow thresholds and competition; processing follows raw-material orientation and scale. Answer concludes that functional specialisation, not general decline, is happening.
Traps that cost marks
- Stating von Thünen rings without the assumptions (uniform plain, single market, transport costs ∝ distance and weight).
- Treating Weber as a description of actual locations rather than a least-cost decision model.
- Claiming digitalisation makes location irrelevant - agglomeration and knowledge spillovers persist.
- Ignoring EU agricultural policy when discussing farm incomes.
- Confusing tertiarisation (share of employment) with deindustrialisation (loss of industrial output).