Pearson Edexcel · A-Level · Economics B
Course version: 9EB0 · Version from Sept 2015
B) Factors influencing the location of production sites: o costs of…
Full specification wording
Assessing the potential of different economies: b) Factors influencing the location of production sites: o costs of production o skills and availability of labour force o infrastructure o location in trade bloc o government incentives o ease of doing business o political stability o natural resources o likely return on investment
Selecting a production site requires balancing multiple factors to maximise the likely return on investment.
Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on .
- Point 2 of 2
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Selecting a production site requires balancing multiple factors to maximise the likely return on investment. Firms seek low costs of production, including cheap land and utilities, alongside the necessary skills and availability of the labour force. High-quality infrastructure is vital for receiving raw materials and shipping finished goods. Location in a trade bloc allows tariff-free access to larger markets, while government incentives like tax breaks reduce initial outlays. The ease of doing business and political stability ensure smooth, uninterrupted operations. Finally, proximity to essential natural resources can significantly cut transport costs for primary and secondary sector businesses.
What earns the marks
- Identify how lower costs of production and government incentives directly improve the likely return on investment for a new facility.
- Explain how location in a trade bloc eliminates tariffs and quotas for exporting to member countries.
- Assess the trade-off between the low cost of unskilled labour and the need for specific skills and availability of the labour force.
- Evaluate how poor infrastructure and political instability can offset the benefits of abundant natural resources.
- Analyse how the ease of doing business reduces the time and capital required to establish a production site.
Common mistakes and how to put them right
Assuming low wages always mean low costs of production.
Put it right: Low wages must be weighed against labour productivity to determine unit labour costs.
Confusing market expansion with production location.
Put it right: Locating production in a country does not necessarily mean selling the product in that country's domestic market.
Believing government incentives permanently reduce operating costs.
Put it right: Incentives are often temporary grants or tax holidays that affect initial setup rather than long-term viability.
Exam tips
- Always link the choice of production location to the firm's specific needs, such as whether it requires highly skilled labour or proximity to bulky natural resources.
- Use location in a trade bloc as a key evaluative point when discussing how firms bypass protectionist barriers.
- Weigh government incentives against long-term factors like political stability and infrastructure when assessing the likely return on investment.
Try the lesson
The start of the Assessing the potential of different economies: b) Factors influencing the location of production sites: o costs of production o skills and availability of labour force o infrastructure o location in trade bloc o government incentives o ease of doing business o political stability o natural resources o likely return on investment lesson, made from checked teaching notes for this specification point.
Have a go first
Which of the following factors is most likely to be the primary consideration for a business deciding where to locate a new manufacturing production site?
Listen
Selecting a production site requires balancing multiple factors to maximise the likely return on investment. Firms seek low costs of production, including cheap land and utilities, alongside the necessary skills and availability of the labour force. High-quality infrastructure is vital for receiving raw materials and shipping finished goods. Location in a trade bloc allows tariff-free access to larger markets, while government incentives like tax breaks reduce initial outlays. The ease of doing business and political stability ensure smooth, uninterrupted operations. Finally, proximity to essential natural resources can significantly cut transport costs for primary and secondary sector businesses. A strong answer earns marks for these points. Identify how lower costs of production and government incentives directly improve the likely return on investment for a new facility. Explain how location in a trade bloc eliminates tariffs and quotas for exporting to member countries. Assess the trade-off between the low cost of unskilled labour and the need for specific skills and availability of the labour force. Evaluate how poor infrastructure and political instability can offset the benefits of abundant natural resources. A common slip: Assuming low wages always mean low costs of production. Instead, low wages must be weighed against labour productivity to determine unit labour costs. Exam tip: Always link the choice of production location to the firm's specific needs, such as whether it requires highly skilled labour or proximity to bulky natural resources.
See it
Key words
Say what each word means before you turn the card.
Costs of production
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Location in a trade bloc
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Government incentives
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Likely return on investment
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See every definition
- Costs of production
- Expenses such as cheap land and utilities that firms seek to keep low when selecting a production site.
- Location in a trade bloc
- Siting production within a trade bloc, which allows tariff-free access to larger markets.
- Government incentives
- Support such as tax breaks that reduce the initial outlays of setting up a production site.
- Likely return on investment
- The expected gain that selecting a production site aims to maximise by balancing multiple factors.
Label the diagram
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1Box 1
2Box 2
3Box 3
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