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Central Place Theory and Market Area Analysis

Chapter 12 sections 2 and 4. Central Place Theory and Market Area Analysis. Terms/Concepts. Central Place Theory Central Place Market Area / Hinterland Range Threshold Gravity model. Why is that Store There?.

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Central Place Theory and Market Area Analysis

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  1. Chapter 12 sections 2 and 4 Central Place Theory and Market Area Analysis

  2. Terms/Concepts • Central Place Theory • Central Place • Market Area / Hinterland • Range • Threshold • Gravity model

  3. Why is that Store There? • Why is there often one retail store like Target in an area but then 4 or 5 gas stations in the same area? • What factors go into why businesses are where they are?

  4. Market Area of Service • Central Place Theory- a theory that explains the distribution of services, based on the fact that settlements serve as centers of market areas for services • Larger settlements are fewer and farther apart than smaller settlements and provide services for a larger number of people who are willing to travel farther • Proposed by German geographer Walter Christaller

  5. Central Place- the market center for the exchange of goods and services by people attracted from the surrounding area • Centrally located to maximize accessibility form the surrounding region • Central places compete against each other to serve as markets for goods and services • Creates a regular pattern

  6. Market Area (hinterland)- the area surrounding a central place, from which people are attracted to use the place’s goods and services

  7. Range and Threshold • To determine a market area geographers need to know a services range and threshold • Range- the maximum distance people are willing to travel to use a service • Radius from the node • Distance willing to travel is based on the value of the good or service • High-order goods will have a longer range • Low-order god will have a shorter range • People are only willing to go short distances for things like groceries and pharmacies • Will travel long distances for baseball games or concerts

  8. Range and Threshold • Threshold- the minimum number of people needed to support the service • Once range is determined, then need to see if there is a high enough threshold within that range • Services must decide what the minimum number of people are for their service • Not all services attract people evenly • The product determines how consumers are counted • Based on age, gender, income, education

  9. Market Area Analysis • Profitability of a location • 1. Compute the range • People willing to travel 15 minutes to a department store • 2. Compute the threshold • Department store typically needs 25,000 people within the 15 minute range • 3. Draw the market area • Draw circle with 15-minute radius • Count number of people within • Gravity model • Predicts the optimal location of a service • Related to the number of people in an area • Inversely related to the distance they must travel

  10. Terms/Concepts • Central Place Theory • Central Place • Market Area / Hinterland • Range • Threshold • Gravity model

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