WAEC Economics 2023 Theory — Question 6

Model answer

(b)(i) Raw materials: If the raw material used is quite bulky or perishable, transporting it over a longer distance is much more expensive or risky, so firms will site their factories near the source of raw materials to reduce transportation costs, e.g. wood and mining companies, food processing and fish farming firms etc. are located near the raw material. (ii) Market: Where finished products are highly perishable, bulky or fragile such that damage will be done to them in the process of transporting them, firms are located very close to the market e.g. glasses, tiles, etc. (iii) Government policy: Governments may want to ensure even development or fulfil campaign promises by siting a firm in a particular area through its policies or laws e.g. industrial estates. This choice is often made without giving any consideration to its economic implication. (c) Advantages of localization of industry: (i) Labour already employed can easily acquire new skills which will be useful in other firms. (ii) New firms can tap the expertise of old ones when it comes to training. (iii) Subsidiary firms that can use the by-products of established firms will emerge. (iv) Firms can co-operate and buy raw materials in bulk to reduce per unit cost or support one another in times of need. (v) It facilitates division of labour and specialization where different parts of a product e.g. equipment, is produced by different firms. (vi) Common problems are identified and a joint research unit can be formed to help solve problems that will arise e.g. internet services, accessibility, security etc. (vii) More jobs are created for the people where an industry is localized and this helps improve the standard of living of the people.