DSE Geography | Industrial Location and Manufacturing Change Lesson-Prep Guide (Tutor Edition) | Cost Tables, Agglomeration and External Costs

2026-11-02

Tutor lesson-prep guides · Secondary Geography

Students write good transport links and stop, but location choice is a cost table. This lesson turns convenient into 709,200 dollars that can be computed.

Objectives — Students can: (1) compute monthly costs of 2.52 million dollars at the urban site and 1.81 million at the suburban site, a 28.1% gap, and unit costs of 105 and 75.45 dollars; (2) use local component supply of 60% against 15% to explain agglomeration and industrial inertia, and why old industrial areas stay put despite higher costs; (3) add an external cost of 1.8 dollars per unit for effluent and compute that external cost must reach 29.55 dollars per unit before the two sites break even.

01 Prerequisites (3-minute check)

If any of these fails, fix it before the lesson starts.

Skill	Quick check	Pass mark
Location	Where a plant sits	Decided by several costs and constraints together
Fixed and variable cost	Rent versus wages	Rent is fixed monthly, wages vary with headcount
External cost	A social cost the firm does not pay	Pollution, congestion, noise

02 Lesson flow (60 minutes)

Time	Stage	Tutor does	Student does
0-10 min	Two sites, one choice	Urban near the port versus cheap suburban land	List three costs
10-24 min	The cost table	Wages, rent and transport added up	Compute 2.52 and 1.81 million
24-34 min	Cost per unit	Total cost divided by output	Compute 105 and 75.45
34-44 min	Agglomeration	Supply chains, labour pools, knowledge spillovers	Explain 60% against 15%
44-54 min	External costs	Pollution and traffic at 1.8 dollars a unit	Compute the 29.55 threshold
54-60 min	Exit check	Three questions marked on the spot	All three right

03 Teaching script (read it out)

Scene 1: Location is an addition sum, not an adjective

A plant makes 24,000 units a month, employs 120 staff and occupies 1,500 square metres. Two sites:
Site A (urban, near the port): wages 18,000 x 120 = 2.16 million; rent 200 x 1,500 = 300,000; transport 2.5 x 24,000 = 60,000; total 2.52 million, or 105 dollars a unit.
Site B (suburban, near a highway): wages 13,500 x 120 = 1.62 million; rent 60 x 1,500 = 90,000; transport 4.2 x 24,000 = 100,800; total 1.8108 million, or 75.45 dollars a unit.
Site B is 709,200 dollars cheaper, or 28.1%. Rent shows the largest ratio (300,000 against 90,000), but wages give the largest absolute saving (540,000), so answers must separate absolute difference from proportional difference.
Why move is therefore a table, not a phrase: rent and wage savings outweigh 40,800 dollars of extra transport.

Ask students: rent saves 210,000, wages save 540,000 and transport costs 40,800 more, so why is the move still worth 709,200.

Scene 2: Agglomeration keeps old sites in place

Choosing a new site is easy to compute; moving an existing plant is not, because the agglomeration already paid for cannot move: local component supply is 60% at site A against 15% at site B, so lead times stretch from two days to two weeks, raising stoppage risk and inventory.
Add the labour pool (skilled workers without retraining) and knowledge spillovers (staff movement, supplier demonstrations). Together these are external economies of scale.
Industrial inertia follows: even with a 28.1% cost gap, the old plant stays, because relocation costs (equipment reset, lost output, staff turnover, recertification) run into the millions at once.
The decision rule: move only when annual savings multiplied by an acceptable payback period exceed the one-off relocation cost.
Manufacturing change follows the same logic: as land and wages rise, low-value processes move out while design, branding, logistics and finance stay as producer services.

Ask students: if the suburb is 28.1% cheaper, why have not all factories moved there (relocation cost and agglomeration).

Scene 3: Price the pollution and the answer can flip

If the suburban site discharges effluent without a sewer connection, it must treat its own waste; at an external cost of 1.8 dollars a unit, 24,000 units cost 43,200, so site B totals 1.854 million, still below 2.52 million.
The break-even point is 709,200 / 24,000 = 29.55 dollars a unit, so external cost must rise to almost 30 dollars before the sites tie. That number matters: cheaper is always cheaper for someone.
Evaluate at three levels: the firm looks at private cost (2.52 against 1.81 million), society at private plus external cost (2.52 against 1.854 million), and policy at whether a charge or permit trade can internalise the gap.
The Hong Kong comparison: as processes moved north, local industrial land turned to data centres, storage and innovation uses, which is the line between deindustrialisation and reindustrialisation.
Do not stop at pollution is serious: name who pays, how much, and which instrument changes behaviour.

Ask students: if a pollution charge of 5 dollars a unit were levied, would the firm switch sites (no, it is below 29.55).

04 Question types and worked steps

Type	Example	Steps	Answer
Calculation	Total cost of two sites	Wages + rent + transport	2.52 and 1.8108 million
Calculation	Unit cost	Total cost / output	105 and 75.45
Explanation	Agglomeration and inertia	Supply chain, labour pool, spillovers	One line each
Evaluation	External cost and policy tools	Private versus social cost	Give threshold and instrument

Sanity check (teach this): Convert units before adding: millions and dollars cannot be mixed.
The denominator of the 28.1% gap is site A at 2.52 million, not site B.
Unit cost divides total cost by output, not variable cost alone.
External cost is a social cost and must not be booked as a private cost and relabelled.
Relocation decisions include the one-off cost, not just the monthly gap.

05 Independent practice (3 questions)

Question	Answer	What to watch
Total cost at site A	2.52 million	2.16 + 0.30 + 0.06
How much cheaper site B is	28.1%	0.7092 / 2.52
External cost break-even	29.55 dollars a unit	709,200 / 24,000

06 Common mistakes and what to say

Mistake	Student writes	Say this
Saying only good transport links	Answer: site A because it is near the port	List three costs and the net difference: rent, wages, transport.
Using the wrong denominator	Answer: site A is 39% dearer	The question asks how much lower B is, so the base is 2.52 million, giving 28.1%.
Treating external cost as a firm cost	Answer: the pollution fee is already in cost	List private and social cost separately, then add them.
Assuming the cheaper site always wins	Answer: the suburb is 28.1% cheaper so all plants move	Count relocation cost and agglomeration; inertia is real.

07 Homework (paper, section and question numbers)

Secondary Geography chapter index — Industry unit, questions 3 to 8
Secondary lesson-prep overview — Compare other subjects
DSE Geography practice papers — Paper 1 industry and regional change

08 Exit check (last 5 minutes)

Question	Answer	Decision
Total cost at site B	1.8108 million	All three right means move to agglomeration
Unit cost of the gap	29.55 dollars	One wrong means reteach units
External cost threshold	29.55 dollars a unit	Two wrong means return to act three

09 Tutor FAQ

Must students know every Hong Kong industrial area?

No. Kwun Tong, Tsuen Wan and Kwai Chung with their new uses are enough.

Is deindustrialisation always bad?

No. Processes move out while producer services and headquarters can stay; what matters is how much value added remains.

How is external cost measured?

By damage cost or avoidance cost, and answers should state the method and assumption.

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A TutorZone lesson-prep guide. Written by the TutorZone team; questions and lesson flow are original and are not taken from any school or publisher material.