TRANSPORTATION DEMAND ANALYSIS DEMAND THEORY

Chapter 2: DEMAND THEORY Consumer Demand Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Example: Agricultural center Industrial center A B No food First :mule track case Transportation with difficulty Loss & deterioration during journey A bit high price A few people can afford as merchant or customers 3 scenarios: Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Example: Agricultural center Industrial center A B No food Second :trail established Transportation with horse-drawn carriages Travel time cut in half Reducing selling price in B Amount of traffic & customers increase Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Example: Agricultural center Industrial center A B No food Third :primitive road Transportation with small trucks Transportation of larger quantities Lower costs & selling price at B Amount of traffic & customers again increase Chapter 2: DEMAND THEORY

Reduction selling price Chapter 2: DEMAND THEORY Example: Increasing traffic system improving selling amount at B Reduction selling price Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Example: Conclusion: One demand condition but many traffic conditions. “Demand for transportation depends on type of transportation system” is wrong and demonstrates the danger of confusing traffic flow with demand. Chapter 2: DEMAND THEORY

Demand & Traffic, differences Definition: Demand for transportation as potential for traffic flow cost Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Demand & Traffic, differences Generalized cost: Actual cost of transportation. Value of time. Deterioration of commodities. Discomfort. Inconvenience of journey. Generalized cost Chapter 2: DEMAND THEORY

Demand vs. Traffic volume Chapter 2: DEMAND THEORY Generalized cost ≡ resistance R Demand ≡ potential V - + Ω Chapter 2: DEMAND THEORY Actual amount of traffic ≡current I V=IR

Transportation Demand Volume is affected by: Condition of the road Transportation cost & Market for foodstuffs in B Transportation demand is a derived demand Chapter 2: DEMAND THEORY

Transportation Demand Chapter 2: DEMAND THEORY Relationship between the amount transported V and the cost of transportation CAB ? Chapter 2: DEMAND THEORY

Transportation Demand PB=PA+CAB PA (constant) QB=Q(PB) Chapter 2: DEMAND THEORY Price at B = price at A + transportation cost QB=DB(PB)=DB (PA+CAB)=V(CAB)

Transportation Demand Chapter 2: DEMAND THEORY VAB=demand for transportation Chapter 2: DEMAND THEORY QB=DB(PB)=DB (PA+CAB) =V(CAB)

Microeconomic Demand Theory Individual level: Consumer demand Individual traveler behavior Part I Urban Networks and Equilibrium 1.2 NETWORK REPRESENTATION levels Aggregate level: Market demand Behavior of total system Summing individuals

Consumer Demand Theory Chapter 2: DEMAND THEORY individual or household, independently making decisions about the amounts of various commodities available during a specific period of time. In consumer demand theory understanding and characterizing the factors that affect consumption behavior is interested. Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Five basic assumptions in consumer demand theory: 1-consumer has a choice. consumer can vary the amount of the various commodities consumed and can vary the amount of money out of the total budget. Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions 2-every consumption give utility or satisfaction to the consumer. These utilities are different for different consumers. Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions 3-the consumer has a consistent preference structure based on the relative utilities. For example :X,Y,Z Preference of x over y and y over Z directly implies the preference of x over z Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions Goods Classification: Competitive goods where a choice truly exists between consumption alternatives. Choice between automobile trip & bus trip Complementary goods Air trip & airport access trip Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions 4-the consumer is assumed to be insatiable . Given the choice between two quantities of the same goods consumer opt larger. Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions 5-the choice of the consumer is limited by a budget constraint. Not unlimited supply nor unlimited choice. Consumer will choose a combination of goods that maximize the utility in presence of budgetary constraints. Chapter 2: DEMAND THEORY

Chapter 2: DEMAND THEORY Basic assumptions 6-The consumer has full information about the goods. Chapter 2: DEMAND THEORY