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Lecture 8

GEOG101 Lecture Notes - Lecture 8: Gross Domestic Product, Gross National Income, Purchasing Power Parity

Geography and Environmental Management
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Week 5B - Economic Geography
1. Economic Geography
Spatial aspects of the economy
o How people earn a living in different areas
o How livelihoods systems vary from place to place
o How economic activities are spatially related
Spatial generalizations
o Interrelationships of economic activity in different places
o Explanations for variations from place to place
2. Economic structure
Gross domestic product (GDP)
Measures the monetary value of final goods and services - that is, those that are brought by the
final user - produced in a country in a given period of time (IMF)
Gross national income (GNI)
Production income flowing into a country (year)
Purchasing power parity (PPP)
Goods and services a currency can purchase locally
Primary sector: harvest or extraction
Agriculture: most important globally
Types of economic systems: small-scale: subsistence
Dominant for >30,000 years
Key similarities:
o All goods & services used by producer (farmer/fisher)
o Little trade or 'value added'
o Basic agriculture (rainfed, nomadic)
o Low level tools/ technologies
o Isolated from world markers (usual)
o Lack of transportation network
o Poverty, food insecurity
Types of economic systems: large-scale commercial/capitalist
Basic 'rules':
Subsistence farming is inefficient
Specialization -> efficiency
o Crop type
o Labour
o Mechanization
o Farm size (larger is better)
o Large-scale efficient transportation networks
o Highly responsive to market or government signals
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Government directives
Secondary sector: manufacturing
Modern manufacturing location highly cost dependent
o Labour costs (minimum wages, training)
o Energy costs
o Linkage costs (e.g. complementary suppliers)
o Transportation
Raw materials -> plant
-> markers
o Taxes
Direct & indirect factors of production
Direct factors
Indirect factors
Raw materials
Financial capital
Financial system
Government support
Mass production
Manufacturing: adds value greater than the sum of the raw materials used.
Secondary sector = value added
"mass production" (efficiency, division of labour/specialization & mechanization)
Quantity of goods rose
Prices dropped -> global distribution
Only certain locations = low cost production
Limited diffusion (cost competitiveness)
Least-cost theory: point at which total of all costs associated with industry are minimised.
Triangle (simple)
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