Central Places Theory (Market Principle)
Central places theory is deri from the work of the German geographer Walter Christaller who investigated the urban system of Southern Germany during the 1930s. He was mainly looking for relationships between the size, the number and the geographic distribution of cities. Although his work is mostly empirical, it is the theoretical part that had the most impacts on geography. His observations enabled the elaboration of  this important theory of spatial structure and order, mandatory in the study of urban, economic and transport geography.
Central places theory tries to explain the spatial distribution of a system of cities. This distribution is best understood by assuming a central place and its market area. A central place has the main function to supply goods and services to the surrounding population. It is specialized in selling various goods and services, and the market area is the summation of consumers traveling to the central place, which is a part of hierarchy with other central places. Its influence is a function of its market area and the size of this market area will determine the nature of the spatial order. The above figure illustrates a system of central places according to the market principle with three orders of centers. In this case the market area of a center of higher order includes the equivalent of three market areas of centers of the next lower order.
Central place theory, as a model of the regional spatial structure, has been the subject of numerous criticisms. The basic hierarchical rules can be questioned, partly because the theory relates only to the service sector. Settlements may develop due to other factors such as the availability of natural resources. The Christaller model holds such factors constant assuming an even plain and a uniform distribution of natural resources. As such, central place theory cannot provide an all-inclusive general theory and there is a need to introduce other theories to explain agglomerations in many areas. The theory also assumes a uniform distribution of the population. This rarely occurs in practice since factors such as soil fertility and climate vary and distort the spatial structure. Also, the dominance of a large metropolitan center may create a "shadow effect", inhibiting the growth of smaller centers nearby.
Still, central place theory is probably the most researched and well-known model of the regional urban spatial structure. It is a purely deductive theory of a highly simplified and abstract nature developed on the basis of very idealized assumptions. It relates only to the service element of regional economy, failing to explain distortions in the hierarchy caused by the location of primary and manufacturing industry, which tends to group into cluster or agglomerations due to resource location. The theory is essentially static, explaining the existence of a regional spatial structure but failing to explain how that structure has evolved in the past and might change in the future. Still, it serves a useful role at identifying important concepts such as the interdependence of a city and its region, a hierarchy of functions and centers, and their market range and threshold populations.