Market Size / Area Relationships in the Central Places Theory

Market Size Area Relationships in the Central Places Theory

The importance of a central place is determined by the order of goods and services being offered. In other words, there is a hierarchy of service activities, ranging from low-order services found in every center to high-order services found only in major centers. Therefore, the size of a market area is directly proportional to the size of its center. The order illustrates the position of a central place in a hierarchy of central places.

To support its activities, each urban center needs a threshold population that varies according to its size. Large cities have an important threshold, so there may be only of few of them on a specific territory, while there can be a large number of small villages. In his analysis of central places, Christaller established seven major orders, ranging from the state capital (Landstadt – L) with a population above 500,000 to the small market town (Marktort – M) with a population of 1,000. This structure was reflective of an era where transport costs were high, and mobility was relatively limited; a large hierarchy of centers was required to service a territory.

The central places hierarchy can be simplified with three levels; A, B, and C. Level A centers have a large range and diversified goods and services (healthcare, shopping mall, finance, etc.). They correspond to large cities or metropolises and offer all the array of possible services. Level B centers are cities of medium size offering an intermediate range of services (banks, restaurants, etc.) over a more limited market area. Level C offers limited goods and services (gas station, convenience store) with a small range. A center of order A has activities of the 3rd order having the lowest range, 2nd order activities with a higher range, and 1st order activities with the highest range. For a center of B order, it only has 2nd and 3rd order market areas.