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Location theory focuses on the geography of economic activity with particular attention to industry. Four industrial categories are used: primary (agriculture, mining, and fishing), secondary (manufacturing of goods), tertiary (services), and quaternary (information).

In relation to the primary industry, Johann Heinrich von Thünen developed a theory of agricultural location in his 1826 work, Der IsolierteStaat (The Isolated State). He investigated the relationship between the distance from a market and the pattern of land use by hypothesizing an isolated area located in a homogeneous environmental plain. A single city served as the market and was surrounded by farmland. Von Thünen assumed that farmers attempt to maximize profit, or economic rent, with the determining factor being transportation costs. He also assumed that transportation costs rise with the ...

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