Neoclassical economics focuses on the behaviour of individual consumers and firms. Consumers and firms interact in markets, which set the prices of goods and services. Taking into account their limited incomes and the prices set in the market, consumers buy the goods and services that maximize their well-being. Taking into account the prices set in the market, firms make decisions, including location decisions that maximize their profits. Firms compete with one another, and this competition ensures that they will seek out and take advantage of profitable opportunities (Cortright (2006) Brookings Inst. Met. Policy Prog.).

Neoclassical economics suggests that surplus labour and capital will move to areas where labour and capital are in short supply, so that uneven development will be eradicated (Taylor (2007) Globalizations 4, 4). Other important ideas include cluster development and trickle-down economics—but see Basu and Mallick (2007) Camb. J. Econ. 32, 3.