A Contextual Theory of Demand: Beyond Spatial Analysis in Economic Geography

Abstract

The Contextual Theory of Demand is a consistent economic explanation of the ways in which a household allocates its time within a geographical setting so as to maximize its satisfaction. The theory describes the spatial behavior of a household which buys a variety of goods and services at a number of locations when faced with uncertainty concerning store prices. The theory does this by replacing the concept of spatial price with the concept of contextual cost. It views geographical behavior as explicable only from a dynamic perspective. Contextual analysis is simultaneously spatial and dynamic. It is the first location theory to abandon the assumption of the homogeneous plain. The Contextual Theory of Demand accepts as input any population geography, distribution of stores, and transport system to produce an explanation of a predicted pattern of consumption and shopping trips, and a corresponding geography of demand.