Central place theory is a geographical

Geography

Geography is the science that studies the lands, features, inhabitants, and phenomena of Earth. A literal translation would be "to describe or write about the Earth". The first person to use the word "geography" was Eratosthenes...

 theory that seeks to explain the number, size and location of human settlements in an urban system

Urban hierarchy

Urban hierarchy a term that relates the structure of towns within an area. It can typically be illustrated by dividing towns into four categories:* 1st-order towns* 2nd-order towns* 3rd-order towns* 4th-order towns...

. The theory was created by the German

Germany

Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 geographer Walter Christaller

Walter Christaller

Walter Christaller , was a German geographer whose principal contribution to the discipline is Central Place Theory, first published in 1933...

, who asserted that settlements simply functioned as 'central places' providing services to surrounding areas.
To develop the theory, Christaller made the following simplifying assumptions:

• an unbounded isotropic (all flat), homogeneous, limitless surface (abstract space
  Abstract space
  Abstract space, in geography, refers to a hypothetical space characterized by equal and consistent properties; a geographic space that is completely homogeneous. All movement and activity would be equally easy or difficult in all directions and all locations within this space...
  
  )
• an evenly distributed population
• all settlements are equidistant and exist in a triangular lattice pattern
• evenly distributed resources
• distance decay mechanism
• perfect competition and all sellers are economic people maximizing their profits
• consumers are of the same income level and same shopping behaviour
• all consumer
  Consumer
  Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
  
  s have a similar purchasing power and demand for goods and services
• Consumers visit the nearest central places that provide the function which they demand.They minimize the distance to be travelled
• no provider of goods or services is able to earn excess profit(each supplier has a monopoly over a hinterland)

Therefore the trade areas of these central places who provide a particular good or service must all be of equal size

• there is only one type of transport and this would be equally easy in all directions
• transport cost is proportional to distance traveled in example, the longer the distance traveled, the higher the transport cost

The theory then relied on two concepts: threshold and range.

• Threshold
  Threshold population
  In microeconomics, a threshold population is the minimum number of people needed for a service to be worthwhile.In geography, a threshold population is the minimum number of people necessary before a particular good or service can be provided in an area...
  
   is the minimum market (population or income) needed to bring about the selling of a particular good or service.
• Range is the maximum distance consumers are prepared to travel to acquire goods - at some point the cost or inconvenience will outweigh the need for the good.

The result of these consumer preferences is that a system of centers of various sizes will emerge.