Transport Costs Surfaces and Location

This example assumes that to produce 500 tons of a good to be sold at market M, 1,000 tons and 800 tons of raw materials available at S1 and S2 respectively are required. Considering transport costs of $1 per ton-km, the goal is to find an optimal location P that minimizes total transport costs. From each point (M, S1 and S2) isovectors (lines of equal transport costs) can be drawn. For instance, the $1,000 isovector from market M indicates that at that location (along the line) it would cost $1,000 to transport the 500 tons to M. Concurrently, the $1,000 isovector from supply source S1 indicates that it would cost $1,000 to transport 1,000 tons from S1 to that line. By overlaying these isovectors, a cost surface can be estimated and where point P corresponds to the minimal summation of total transport costs. Figuratively, P is at the "bottom" of the cost surface.