What is transport?
Transport refers to the movement of people or products from one place to another.
If it refers to:
-People, we speak about passenger transport measured in passenger kilometers.
-Products, we speak about freight transport measured in tonne kilometers.
Transport is mainly divided in two parts, Public transport which includes the underground, bus or railway and private transport which includes the taxi, car or lorry. Making decisions about what type of transport is best to use is called transport operations.
Transport operations have both a demand and a supply side.
Demand: factors taken into account in making transport decisions include cost, journey time and flexibility. (more detailed list ahead)
Supply: Firms make decisions about what type of transport mode to provide. Maximizing profits is the main target when doing this.
Transport :
- Is a derived demand; not demanded for own sake but to meet other purposes
- Is a service, cannot be stored and is consumed immediately.
- Intermediate output, it’s just one stage of processing final products.
- Has distance and time dimension.
Transport generates negative externalities(like pollution, congestion and noise) causing market failure because the price of transport doesn’t always include the cost to society.
Terms:
Loading refers to % used capacity of transport.
Peaking occurs when demand exceeds supply causing congestion, like in rush-hours.
Off peak travel takes place outside the ‘rush hour’ immediately before the start and after the end of work hours
transport operations = making decisions about what the best transport mode is for your journey.
Transport infrastructure.
Infrastructure possible in two categories:
- The transport network, E.G. roads and railways.
- The transport nodes and terminals where journeys begin. E.G. Busstations, railway stations.
Better infrastructure causes better transport system to:
- Improve the mobility of labour
- Create positive externalities. E.G. Roads may cause benefits for local business and workers.
- Improve international competitiveness: efficient transport systems minimize travel times and so lower domestic cost units.
Improvement of infrastructure is hard because of the huge amount of time (projects take 5-30 years and money involved.
Transport modes and model characteristics.
Transport modes refer to various methods of transport. When people make transport operations( decisions about what modes they will use) they will take several things into account:
- Distance
- Speed
- Urgency of journey
-Convenience
- Reliability
- Capacity ( can 6 people fit in my car?)
- Relative costs of using, say, road or rail
- Risk of delay
Freight users also take the nature of the product into account. (Perishable goods are sent by waterway over long distences.)
The use of Elasticity of Demand in transport.
PED is used by firms to predict:
- The effect of a change in fares on quantity demanded.
- The effect of a change in fares on total revenue & expenditure.
- The effect of a change in indirect tax E.G. road charging or fuel duty on price and quantity demanded.
- The effects of price discrimination in peak/off peak. Price discrimination is where a monopolist charges different prices for the same product to different segments of the market. (different times using transport)
Income Elasticity of Demand.(YED) and Cross Elasticity of Demand (XED)
Government and firms use YED to predict impact on demand and revenues of:
-Economic growth: the demand for luxury items such as air travel increases proportionately more than products with low YED such as bus travel. (Economic growth raises incomes)
- The business cycle: fluctuations in the demand for transport can be estimated.
Congestion problem caused by cars heaving a high YED, increased prosperity will lead to more car usage which will result in congestion and environmental impacts. Buses have a low, or even negative YED, and are mainly used by low income consumers.
Cross Elasticity of Demand.(XED)
Firms use XED to estimates to predict the impact of a rival’s pricing strategy on demand for their own products.
Structure of transport Operations in the UK
There has been a 182% increase in demand for transport since 1960. The main reasons are:
Consumers: People choose to live further away from work; parents are less willing to let children walk to school; holiday makers take long distance trips.
Firms: Improved transport and communications allows production and consumption take place in different locations, sometimes on the other side of the world. ( globalization)
passenger travel within UK.
Road is the dominant mode for all journeys of more than one mile. Cars are used predominately by high income groups, such as the railway. However, buses are used predominately by low income groups.
Here’s an historical overview of passenger travel by mode.
Freight Transport.
Total freight transport in tonne kilometres has increased by 46% since 1980. Overtime the freight increased most on the road.
Forecasted demand and the economic basis of transport forecasts
Forecasts for E.G. expected economic confidence, predicted disposal income and likely oil prices are used by governments to estimate the future demand & supply of travel by mode.
If demand is predicted to exceed supply the government will try to intervene and will reduce demand or increase supply.
There are three main sources of uncertainty in transport forecasts:
- The future path and values of variables used in a model (E.G. G.D.P. or oil price) may diverge from predicted values.
- The specification and stability of statistical relationships used in the model may change over time.
- A model may leave our factors that do not currently affect consumer behavior but may in future be important. E.G. eurotunnel predictions did not take in account the advent of low air flights between London and Paris.
Some forecasts about Britain’s Transport.
No comments:
Post a Comment