Transport Economics

The nature of transport
1. Transport infrastructure
  1. The physical and immovable transport routes
  2. e.g. roads, railways, airports, sea ports, canals etc
  3. Generally provided by government due to the problems arising from public goods and the externalities caused
2. Mode/ type of transport
  1. e.g. walking, cars, trains, bike, plane, boat etc
3. Derived demand
  1. "When a good is demanded as a result of demand for another product"
  2. Factors affecting demand for transport
    1. Physical characteristics of the good being transported
      1. Low quantities of high cost goods - air
      2. High quantities of low cost goods - rail/ ship
    2. Price of transport
    3. Relative prices of different modes of transport
    4. Passenger income
    5. Quality of service
    6. Consumer choice
Ownership and organisation of transport
1. Public ownership
  1. Government owns the means of production and takes responsibility for it
2. Private ownership
  1. Ownership of resources rests with the private sector
3. Direct government provision
  1. Government strategically provides goods and services on a non-commercial basis
  2. e.g. new motorways and roads funded either by central or local government through tax revenues
4. Public-Private partnerships (PPP)
  1. Private enterprise joins the public sector in sharing some of the financial and operational risk of running the service
  2. e.g. Tube Lines (private company) responsible for maintenance and upgrade of London's underground, commissioned by Transport for London (public body)
5. State-owned company
  1. Operates commercially, profits returned to public ownership for re-investment into the capital and infrastructure of the service itself
  2. e.g. Network Rail
6. Private ownership
  1. Economic value generated remains in private hands
  2. Either fully self-funding or rely on subsidies from the government
  3. e.g. UK port authorities/ train operation
Forecasting road transport demand
1. The National Transport Model (NTM)
  1. Three drivers of road use demand: 1) Gross Domestic Product 2) Fuel Efficiency and fuel prices 3) Population growth
Costs and Revenues
1. Types of firm
  1. Sole proprietor
    1. Owned and often run by one person who makes all the decisions and bears all the risks.
    2. Have unlimited liability - can lose all they own in the event of bankrupcy.
  2. Partnerships
    1. 2 to 20 people jointly bearing decision making and risks
    2. Have unlimited liability
  3. Joint stock companies - issue shares
    1. Private limited companies (Ltd.)
      1. Split into shares giving shareholders partial ownership and a right to a share in profits
      2. Shares sold in private exchanges with specific contact between buyer and seller not on stock market
      3. Generally smaller than PLCs
    2. Public limited companies (PLC)
      1. Sell (at least a proportion) of shares on the stock exchange.
        Anyone can buy shares
      2. Owned by shareholders, run by directors who are elected by shareholders
      3. Limited liability- can only lose what you invested

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Transport Economics

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