9. Producers Price Index

• Producers Price Index (PPI)


  • Measures the rate of change in prices of products sold as they leave the producer
  • Advanced indicators of price changes throughout the economy
• Industrial Location Theory (Least Cost Theory)

  • Founded by German economist Alfred Weber in (1909/1929)
  • Emphasises the role of transportation costs in the location decision of individual companies
  • Originated with the study of manufacturing (applicable to other industries such as services as well)
• Assumptions of the Industrial Location Theory Model

  • Isolated state (no relationship with other areas having homogenous condition)
  • Some resources have fixed location
  • Transport costs are function of weight and the distance
• Types of costs in Industrial Location Theory

  • Transportation costs
  • Labour costs
  • Manufacturing Costs
• Where will the industry be located?

  Location industry should be cost effective (identify the least cost location)
• Industrial Revolutions


  • 1st Industrial Revolution 1740 (mechanization of production, use of steam power)
  • 2nd Industrial Revolution 1840 (Technological Revolution, technological advancements in industries, discovery of electricity, methods of communication and transport, assembly-line production)
  • 3rd Industrial Revolution 1950 (Internet Revolution, semiconductors and mainframe computing)
  • 4th Industrial Revolution 2000 (Digital revolution, application of information and communication technologies)
• Service Industry


  • Parts of economy providing services to individual consumers (e.g. medical treatment or entertainment), or to business (e.g. architectural, cleaning, computing, engineering, or legal work)
  • Collectively referred to as the tertiary sector
  • Increasing part of total activity in advanced economies
• Services Economic


  • Activity associated with the buying and selling of intangibles, including expertise and information
  • Production and consumption of intangible inputs and outputs
  • Economic "goods" which do not take a tangible and storable form
• Types of Services


  • Physical presence of the customer (e.g. hairdressing, medical treatment)
  • Services performed at a distance (e.g. legal representation or insurance)
• Financial Services


  • Services provided by banks and other financial corporations
  • Include deposit taking and lending, credit card services, commissions and charges related to financial leasing, factoring, and clearing of payments
  • Also include financial advisory services, custody of financial assets or bullion, financial asset management, monitoring services, liquidity provision services, merger and acquisition services, credit rating services, and stock exchange services