The term agglomeration is an economic term used to refer to the phenomenon of firms being located close to one another. There are a number of components we'll explore later in this lesson, but for now just remember that agglomerationrelates to clusters of population or business activity.

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There are actually two major categories of agglomeration: Urbanization economies and Localization economies. The term urbanization economies refers to benefits that firms in a number of different industriesreceive from population and infrastructure clusters. A great example of this is a shopping mall.

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