NECO Economics 2013 Theory — Question 12

Model answer

(i) Raw materials: a firm may choose to locate near sources of raw materials to reduce transportation costs and gain a competitive advantage in terms of cost of production, since it is economical to locate close to the raw material source. (ii) Market: a firm may choose to locate its site near its target market (buyers) to reduce transportation costs of taking goods to market and gain a competitive advantage in delivery time; locating close to consumers reduces cost and ensures faster delivery. (iii) Government Policy: government policies such as subsidies, tax incentives and regulations can influence the location decisions of firms, to achieve even development across regions; areas favoured by government policies attract more investors.