Central Place Theory

Central Place Theory (CPT) by Walter Christaller is a way to explain the location, number, and size of settlements, where these locations acted as central places that provided services to surrounding areas.
Central Place Theory sought to explain the economic relationships of cities with smaller settlements. It also seeks to explain why cities are located where they are geographically and how they serve the surrounding smaller settlements with speciality of goods and services.
Central Place Theory seeks to explain the relative size and spacing of towns and cities as a function of people’s shopping behaviour. It explains how and where central places in the urban hierarchy should be functionally and spatially distributed.
The smallest settlements in an urban system will provide only those goods and services that meet every day needs (bakery and dairy products and groceries) and these small settlements will be situated relatively close to one another because consumers, assumed to be spread throughout the countryside, will not be prepared to travel far for such items. On the other hand, people will be willing to travel farther for more expensive, less frequently purchased items usually found in the larger settlements.
Range and Threshold are taken into account when deciding where to place a business.

First, as settlements get bigger, then fewer large settlements emerge. The larger settlements grow the further larger settlements are from each other. As settlements grow, the range and functions that it provides also grow. As settlements grow, they tend to specialize more and provide greater services.
Central Place Theory can be visualized is a pattern of hexagons and networks that form when setting up the arrangements of the different order of settlements.
Over a homogenous landscape in terms of population distribution, soil fertility, and transportation systems, lower order settlements (villages and hamlets) form a hexagon pattern around intermediate order settlements (towns) which in turn form a hexagon around higher order settlements (cities).