5.3. Transport demand and supply

The concept of demand and supply are fundamental to economic theory and is widely applied in the field to transport economics.

Demand and supply are core concepts in economics. In transport economics, they are used to understand how the need for transportation services is determined and met. Essentially, demand refers to how many people want transport services based on various factors, while supply refers to the availability of these services in response to that demand.

Think of it like a street market: if many people want to buy apples (high demand) but there are only a few stalls selling them (low supply), the price of apples will go up. In transportation, if many people want to travel but there aren't enough buses or trains available, it can lead to increased prices for fares.

However, we must be aware of the fact that the transport demand is a derived demand, and not a need in itself.

Transport demand is described as 'derived demand' which means it originates from the demand for other activities, such as working, shopping, or leisure. People do not travel just to travel; they travel to get to places where they can do things they want or need to do. This understanding is crucial for planners to create effective transport systems.

Imagine a person going to work. Their travel is not motivated by the desire to be on the bus or train, but rather to reach their workplace. Therefore, the journey they make is derived from their need to fulfill their job responsibilities.

The concept of equilibrium is central to the supply-demand analysis. It is a normal practice to plot the supply and demand curve as a function of cost and the intersection is then plotted in the equilibrium point.

Equilibrium refers to the balance between the quantity of transport services demanded and the quantity supplied. This is typically graphically represented by curves showing demand and supply. The point where they intersect is called the equilibrium point, indicating where the market for transport is stable and no excess supply or demand exists.

Consider a coffee shop. When the price of coffee is high, fewer customers buy it (low demand). However, if the price drops, more customers might buy coffee (high demand). The coffee shop must find the right price where they sell coffee without wasting any, which is the equilibrium price.

The demand for travel T is a function of cost C is easy to conceive.

This means that the number of trips people make (demand) is influenced by the costs associated with those trips (like fares or fuel prices). Generally, if the cost of travel goes up, the demand for that travel will go down, and vice versa. Understanding this relationship helps transport planners predict how changes in pricing will affect travel patterns.

Picture a toll road. If the toll is set too high, many drivers may choose alternate routes (reduce demand). If the toll is lowered, more drivers may opt to use the toll road due to the time savings, thus increasing demand.

Thus, the supply function encapsulates response of the transport system to a given level of demand.

The supply function in transportation describes how the transport system reacts to the demand for travel. It indicates what level of service can be provided based on the expected demand. For example, if more people want to use public transportation, the service provider may need to add more buses or trains to meet this demand effectively.

If a local bus service notices that more people are using their service during rush hour, they may respond by adding extra buses during those peak times. This shows the direct response of the supply system to the observed demand.

The most common supply function is the link travel time function which relates the link volume and travel time.

A link travel time function is a mathematical function that relates how many vehicles are on a road (link volume) to how long it takes to travel through that road segment. It illustrates the relationship between congestion and travel time; as more cars are on the road, travel times generally increase.

Think of a two-lane road. If there are only a few cars, you can travel quickly, but if many cars are trying to use the same road, traffic jams occur, and travel time increases. This function helps traffic planners understand how to manage roadway capacity.

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