Transport systems help overcome the effects of distance and:
1. Increase the size of the market by enabling domestic goods to be sold globally;
2. Create mass markets
3. Enhance opportunities for international trade / economic integration
4. Enables just in time production techniques
5. Improved mobility of labour (commuting possible)
1. Transport accounts for nearly 15% of
2. Transport infrastructure generates positive externalities
3. Investment in transport infrastructure can be an initial stimulus to regional economic development.
The quantity of transport demanded is dependent on a range of factors:
1. The price of a journey e.g. price of petrol or rail fare
2. Price of substitutes e.g. coach or rail fare.
3. Price of complements e.g. price of new cars and petrol.
4. Income e.g. low income households cannot afford a car.
5. Consumer taste e.g. public transport unreliable.
6. Time – how long will a journey by a given transport mode take?
Consumer behaviour changes have increased demand for car travel:
1. Workers commute longer distances.
2. Out of town shopping centres encourage road usage.
3. More pupils are taken by car in the school run.
4. The price of new cars has fallen following government fair trade investigation stimulating demand.
This is where a firm sells identical products at different prices to different buyers.
· Passengers or freight users: wants low price/costs and reliable safe journeys.
· Employees: seeking high wages and good working conditions.
· Employers: (operators) want minimum costs, maximum profits and meeting government targets.
· Managers: seeking bonuses and promotion.
· Owners/shareholders: maximum profits, dividends and growth.
· Local communities: want excellent transport infrastructure and minimal negative externalities.
· Government: want to satisfy voters, invest in infrastructure and high tax receipts.
- Productive efficiency – firms delivering the highest possible output from given inputs by producing at the lowest unit costs.
- Allocative efficiency – resources are allocated to the production of goods/services most valued by society.
In terms of:
1. Productive efficiency:
· Unit costs leading to higher profits;
· Firms who do not produce at unit cost may be forced to close.
2. Allocative efficiency:
- Produce goods/services most people want
- Enter industries enjoying abnormal profits
- Leave industries suffering abnormal losses
Non-price competition in the form of differentiation through:
- Brand Image
Unregulated monopolies have the freedom to set profit maximising (or loss minimising) price/output.
- Cap price increase
- Monitor service quality
- Introduce competition
- Significant economies of scale
- A natural monopoly e.g. railway network MES is so high meaning one firm can fully exploit the potential of economies of scale.
- Only monopolies can generate sufficient profits to enable large scale high cost of R&D.
The degree of monopoly power is related to the availability of close substitutes through:
- Unique or highly differentiated products
Internal organic growth or mergers/takeovers
Government encourage competition through:
- Privatisation e.g. telecommunication; water; electricity etc.
- Removal of barriers to entry and open up a market to greater competition.
- More entrants (new firms)
- More frequent services
- Lower fares
- More buses operating below full capacity.
- Adding to existing congestion.
- Increasing pollution in crowded city centres.
- Improved services
- More competitive charges
- Better customer services
- Enhanced efficiency