Define Agglomeration Economy .......... Pls fast guys..........
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Economies of agglomeration or agglomeration effects are cost savings arising from urban agglomeration, a major topic of urban economics. One aspect of agglomeration is that firms are often located near to each other.[1]:1 This concept relates to the idea of economies of scale and network effects.
As more firms in related fields of business cluster together, their costs of production may decline significantly (firms have competing multiple suppliers; greater specialization and division of labor result). Even when competing firms in the same sector cluster, there may be advantages because the cluster attracts more suppliers and customers than a single firm could achieve alone. Cities form and grow to exploit economies of agglomeration.
Diseconomies of agglomeration are the opposite. For example, spatially concentrated growth in automobile-oriented fields may create problems of crowding and traffic congestion. It is the tension between economies and diseconomies that allows cities to grow but keeps them from becoming too large.
The basic concept of agglomeration economies is that production is facilitated when there is a clustering of economic activity. The existence of agglomeration economies is central to the explanation of how cities increase in size and population, which places the phenomenon on a larger scale. The concentration of economic activity in cities is one reason for their development and growth.
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As more firms in related fields of business cluster together, their costs of production may decline significantly (firms have competing multiple suppliers; greater specialization and division of labor result). Even when competing firms in the same sector cluster, there may be advantages because the cluster attracts more suppliers and customers than a single firm could achieve alone. Cities form and grow to exploit economies of agglomeration.
Diseconomies of agglomeration are the opposite. For example, spatially concentrated growth in automobile-oriented fields may create problems of crowding and traffic congestion. It is the tension between economies and diseconomies that allows cities to grow but keeps them from becoming too large.
The basic concept of agglomeration economies is that production is facilitated when there is a clustering of economic activity. The existence of agglomeration economies is central to the explanation of how cities increase in size and population, which places the phenomenon on a larger scale. The concentration of economic activity in cities is one reason for their development and growth.
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