What is agglomeration economy?
Agglomeration economy is an economy where different firms are located closely to one another. In this kind of economy, firms are clustered together and in this way they reduce lots of cost of production and many such related expenses. Many of the firms and industries follows this kind of economy to gain advantages. There are two major categories of agglomeration. These are :-
Urbanization Economies-
When a firm in a number of different industries receive benefits out of the population and infrastructure cluster together, it is known as urbanization economies.
Localization Economies-
Localization economies is the one in which the firms belonging to the same industry gets the benefits from being closely packed together.
Examples of agglomeration economies:-
1- In the Forum Mall, Bangalore, many shops and showrooms dealing with different goods and services are available. They share same infrastructure, building, parking lots and many more. Thus, there cost is reduced to certain extent because of some factors shared by them.
2-Electronic city, Bangalore is the place where many large MNC companies are located. They too share the same location or area, parking lot etc. Thus, the companies's expenses is reduced to certain extent.
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