Agglomeration economies refer to the benefits that businesses and individuals experience when they are located close to one another. This clustering can lead to increased efficiency, as companies can share resources, labor, and information. For example, when many tech companies are situated in the same area, like Silicon Valley, they can easily collaborate and innovate. Additionally, agglomeration economies can enhance the local labor market. A concentration of firms in a specific industry attracts skilled workers, creating a competitive job market. This can lead to higher wages and better job opportunities for employees, benefiting both the workforce and the businesses that rely on their expertise.