Today’s Agenda  Assignment 1 is due Monday I’ll accept until Friday without penalty  Questions?  Review  Transportation Eras in the US  Freight Rates  Multimodal  Freight rates and industrial location

Transportation: Transport Eras in the US  Taaffe’s 4 Eras of US Transport Development 1. Local era until Trans-Appalachian e.g. Erie Canal Cumberland Gap  Tennessee-Kentucky $280 million

Transport Eras in the US  Era of Railroad dominance: Shift from canals to rail Opening of Midwest Gateway cities  Competitive Era Decline of rail Universal car ownership/Semi-trailer trucking/Interstate highway system Air mode Deregulation

Canadian Transportation  Local/waterways  State leadership/strategic role of transport Direct Crown involvement:  Settlement roads of Upper Canada  Canals and ports e.g. Rideau Canal  Intercolonial Railway/CNR  Trans Canada Airlines/Air Canada  St Lawrence Seaway  Trans-Canada Highway Indirect crown subsidies e.g. CPR

Transport rates: Prices for movement of goods Varies by commodity  Freight rates for finished products are higher than for raw materials.  Handling characteristics Perishability Fragility  Regularity of shipment Unit trains Irregular/over-size/high cube e.g. furnishings  Competition/elasticity of demand

Transportation  Variations in Transportation cost structures: Cost components:  Terminal costs  Line Haul costs Structure of Line Haul rates:  Linear  Non-linear

Transportation Costs Total Cost Distance Linear and Proportional to Distance Distance Invariant over distance Per unit costs

Different Cost components Terminal costs (fixed costs of loading) Line haul costs (movement costs) Cost $ Distance Linear Line Haul Costs Terminal Costs

The effect of cost components Cost $ Distance Linear Line Haul Costs Terminal Costs Cost PER UNIT DISTANCE Distance Terminal costs are “spread out” over longer distances: LONG HAUL ECONOMIES

Tapering Total Tptn Cost Curve  The effect of cost components: Cost PER UNIT DISTANCE Distance Terminal costs are “spread out” over longer distances: LONG HAUL ECONOMIES TOTAL COST Distance LONG HAUL ECONOMIES: Tapering Total Cost

Terminal Costs by Mode: Road Terminal Cost $ Distance Rail Water

Line Haul Costs by Mode Road Line haul Costs PER UNIT distance Distance Rail Water

Total Costs by Mode Road (Truck) Total Cost Distance Rail Water Differing Long Haul Economies Differing Terminal Costs RoadRailwater