1. Chapter 12 Key Issue 3: Services
By Taylor Brohamer and Sydney Garcia

2. Why are consumer services distributed in a regular pattern?
Consumer services have a different distribution than business services, they generally follow a regular pattern based on size of settlements, with larger settlements offering more consumer services than smaller ones.

3. Central Place Theory
The central place theory helps to explain how the most profitable location can be identified.
It was first initiated in 1930’s by Walter Christaller, a German geographer. This theory was further established by August Losch, and Brian Berry, and other in the United states during 1950’s.
A central place is market center for the exchange of goods and services by people attracted from the surrounding area. It is centrally located to others to serve markets.
This creates a regular pattern of Settlements.

4. Market Area of a Service
The market area or hinterland is the area surrounding a service from which customers are attracted to.
A market area is a nodal region. To establish the market area, a circle is drawn around the node of service on a map. A territory inside the circle is its market area.
People closer to the middle of the circle are more likely to attain services from local establishments and people on the outside from other nodes.People on the edge are just as likely to go to either place.
All of the U.S. can be divided into market areas based on the hinterland surrounding the largest urban settlements, and currently there are 171 functional regions.
Market areas are represented by hexagons, because there is no overlapping, and close to equidistant.

5. Size of Market Area
The market area of every service varies, so geographers need to pieces of information to determine the market area: the range, and the threshold.

6. Range
The range is the maximum distance people are willing to travel to use a service.
It is the radius of the circle drawn to dellineate a service’s market area.
Depending on the service the importance of distance changes.
People tend to go to the nearest available service.
The range of a service is irregularly shaped to take in only the area for which the site is closer than competitors’ sites.

7. Threshold of a Service
Threshold is the minimum number of people needed to support the service.
Every business needs a certain amount of people to generate a profit.
After the range is established, the service provider has to decide if a location is good by counting the number of potential customers inside the circle.
How potential consumers inside the range are counted depends on the product.
If a good or service appeals to certain customers, then only the certain customers will be counted.

8. Market-Area Analysis
Retailers and other providers of consumer services use market area analysis to determine if locating in the area would be profitable and where they should build in the market area.

9. Profitability of a Location
To determine if a location will be profitable they:
Compute the range. They may survey local residents and see how far they’d travel for a service or product.
Compute the threshold. They figure out how much the customer would spend on their product, and then how many customers they need to make a profit.
Draw the market area. Draw a circle big enough to attract the number of customers that will be needed to make a profit, adjust boundaries for competitors, and then count the number of people within the circle.

10. Optimal Location Within a Market
Businesses need to decide where their service should be located to get the most profit. The best location is the one that minimizes the distance to the service for the largest number of people.
To compute the optimal location in a linear settlement, geographers use the gravity model.

11. Gravity Model
The gravity model predicts that the optimal location of a service is directly related to the number of people in the area and inversely related to the distance people must travel to access it
According to the gravity model in a linear settlement, consumer behavior reflects two patterns:
The greater the number living in a particular place the greater the number of potential customers for a service. More people can live in an apartment then a family in a single house.
The further people are from a particular service the less likely they are to use it.

12. In a nonlinear settlement geographers still use the gravity model using these following steps:
Identify a possible site for a new service.
Within the range of the service, identify where every potential user lives.
Measure the distance from the possible site of the new service to every potential user.
Divide each potential user by the distance to the potential site for the service.
Sum all of the results of potential users divided by distances.
Select a second possible location for the new service, and repeat steps.
Compare the results of step five for all possible sites.
Then they decide based on scores, what is the most optimal location.

13. Hierarchy of Services and Settlements
Small settlements have a hard time finding this optimal location due to the small amount of people, short ranges, and small market areas.
Larger settlement provide consumer services having larger thresholds, ranges, and market areas.
Services patronized by a small group of locals, can coexist in a neighborhood along with services that attract many from throughout the settlement.

14. Nesting of Services and Settlements
Market areas across an MDC would be a series of hexagons of various sizes unless interrupted by physical features.(mountains, lakes, cliffs. Etc.) MDC’s have numerous small settlements with small thresholds and ranges, and far fewer large settlements with large thresholds and ranges.
Larger hexagons for larger businesses, are overlaid on smaller hexagons of smaller settlements.
Geographers have noticed a similar hierarchy of settlements in parts of S. Germany, and Us. Midwest.
The principle of nesting market areas also works at the scale of services within cities.

15. Rank-Size Distribution of Settlements
In many MDC’s geographers observe that ranking settlements from largest to smallest populations produces a regular pattern or hierarchy. This is a rank sized rule in which the country’s nth-largest settlement is 1/n the population of the largest settlement.
If the settlement hierarchy does not graph as a straight line, then the country does not have a rank-sized distribution of settlements. It may follow the primate city rule in which the largest settlement has more than twice as many people as a second ranking settlement. In this distribution, the country’s largest city is called the primate city. Several primate city distributions exist in Europe.
A regular hierarchy indicates that the society is suffieiently wealthy to justify the provison of goods and services to consumers throughout the country. The absence of regular hierarchy in an LDS indicates that there is not enough wealth in the society to pay for a full variety of services. This makes it harder for people in LDCs who lack transportation from rural areas to reach services in the urban areas.

17. Periodic Markets
Services at the lower end of the central place hierarchy may be provided at a periodic market, which is a collection of individual vendors who come together to offer goods and services in a location the next day. This market is usually set up in the street, in the day, and varies in location.
Usually provides goods in rural areas in sparse populations.
This kind of market is good in villages and other rural locations.
These markets may occur on a weekly calendar, a certain number of days like China’s 3 city-10 day markets, lunar cycles, and holiday events.

18. Summary
Consumers services attract customers from market areas of varying size. Geographers calculate whether a service can be profitable within a market area by range threshold. In MDC’s, market areas form a regular hierarchy by size and distance from each other.

19. Vocabulary Used
Central Place Theory: Helps to explain how the most profitable location can be indentified.
Central Place: Market center for the exchange of goods and services by people attracted from the surrounding area.
Market Area or Hinterland: The area surrounding a service from which customers are attracted.
Range: Maximum distance people are willing to travel to use a service.
Threshold: Minimum number of people needed to support the service.
Gravity Model: predicts the optimal location of a service is directly related to the number of people in the area, and the distance people must travel to access it.
Rank-Size Rule: A country’s nth-largest settlement in 1/n the population of the largest settlement.
Primate City Rule: A country with not rank-size distribution, in which the largest city has more than twice as many people as the second-ranking settlement
Primate City: A countries largest city.