What factors would influence a firm to locate closer to its inputs rather than closer to its market?
What will be an ideal response?
Answer: Every industry uses some inputs and sells to customers. The farther something is transported, the higher the cost, so manufacturers try to locate factories close to both suppliers and sellers.
If inputs are more expensive to transport than products, the optimal location for a factory is near the source of inputs. Conversely, if the cost of transporting the product to customers exceeds the cost of transporting inputs, then the optimal plant location is as close as possible to the customer.
Every manufacturer uses some inputs. These may be resources from the physical environment, like minerals, wood, or animals, or they may be parts or materials made by other companies. An industry in which the inputs weigh more than the final products is a bulk-reducing industry. To minimize transport costs, a bulk-reducing industry, like copper production, locates near the source of its inputs.
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