transport economics - introduction
Transport refers to the movement of people and goods between destinations.
Transport economics studies the allocation of resources used to move passengers and freight from place to place.
How are passengers and freight moved? Via a transport mode. A transport mode is a method of moving passengers or freight. The main transport modes are road, rail, sea, air and pipelines
Benefits of transport systems
Transport systems help overcome the effects of distance. They also provide the following benefits
· Increased size of the market by enabling domestic goods to be sold globally
· Enhanced opportunities for international trade and the benefits or economic integration
· Enabling of Just in Time (JIT) production techniques. Components are delivered when needed reducing a firm’s stock levels hence unit costs
· Improved mobility of labour: workers can live many miles from work and commute
· Improved UK competitiveness: efficient transport systems minimise travel times and so lower domestic unit costs
The term transport infrastructure refers to the social overhead capital that enables the movement of people and freight to take place. In terms of a developed economy, a substantial amount of social capital is invested in the transport infrastructure.
· Transport accounts for around 15% of UK economic activity measured in terms of GDP.
· The transport infrastructure generates positive externalities. Investment in local transport infrastructure can be an initial stimulus to regional economic development. For example roads open up market and employment opportunities, to the benefit of third parties such as local businesses and workers
· Infrastructure changes affect the cost of travel and so influence consumer and producer behaviour
Transport operations refer to decisions about what type of transport mode to use or provide. These decisions fall into two main categories - "demand side" and "supply side":
· Demand side decisions are about what journey to make, by what mode, and at what time are taken by consumers and firms
· Supply side decisions concern what transport mode to provide
The privatisation of nationalised bus and rail operators means most supply side operational decisions are increasingly taken by profit maximising private sector bus companies and train operators
Government still plays an indirect role by appointing regulators, such as Office of the Rail Regulator (ORR), to monitor private sector transport operators such as Train Operating Companies (TOC's) like Virgin Rail
For a complete guide to Transport Economics, we recommend that you purchase our latest Q&A Revision Guide on Transport. Recently extended and updated, the Transport Q&A Guide provides answers to all the questions that can be asked about Transport Economics in your exams. Click here for more detail
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