Location theory is concerned with the geographic location of economic activity; it has become an integral part of economic geography, regional science, and spatial economics. Location theory addresses the questions of what economic activities are located where and why. Location theory rests — like microeconomic theory generally — on the assumption that agents act in their own self-interest. Thus firms choose locations that maximize their profits and individuals choose locations that maximize their utility.
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“There could be no fairer destiny for any physical theory than that it should point the way to a more comprehensive theory in which it lives on as a limiting case.”
—Albert Einstein (1879–1955)