Transportation Economics: Demand, Costs, and Market Structures

Posted on Mar 23, 2025 in Spanish

Key Characteristics of Transport

  • No Storage
  • Limited Competition (Barriers to Entry)
  • Dependence on Demand from Businesses and Households

Factors Affecting Individual Transport Demand

  • Price: Product price affects demand, consequently impacting transport demand.
  • Time: Transport speed and service quality are crucial.
  • Consumer Income: Disposable income influences demand for final products.
  • Consumer Preferences

Factors Affecting Aggregate Demand

  • Urban Form
  • Economic Activity
  • Geography
  • History and Culture
  • Politics

Ways to Achieve Economies of Scale

  • Division of Labor: Specialization leads to increased efficiency.
  • Increased Capital: More transport vehicles increase production.
  • Company Agglomeration: Reduced costs and market concentration through company mergers.

Sources of Diseconomies of Scale

  • Internal: Large companies face bureaucracy, increasing costs.
  • External: Numerous companies in an industry lead to infrastructure collapse.

Price Discrimination Strategies

  • First Degree: Different prices for the same product/service for different consumers (e.g., auctions, haggling).
  • Second Degree: Price varies with quantity sold (e.g., bulk discounts).
  • Third Degree: Different prices for different consumer segments (e.g., leisure vs. business travel).

Market Structures

Perfect Competition

  • Many providers and demanders
  • Free entry and exit
  • Buyer indifference
  • Perfect information

Monopoly

  • No productive or allocative efficiency
  • Price maker
  • Barriers to entry
  • Average Revenue > Average Total Cost = Profits

Oligopoly

  • Few companies
  • Maximum profit, considering competitors

If a firm’s average costs fall as its operation expands, this indicates Economies of Scale.

Compared to perfect competition, a monopoly produces Less quantity of the service.


Multiple Choice Questions

  1. Price elasticity of demand for transportation is greater when:
    a) Substitutes exist
  2. Inter-urban demand for transportation:
    a) Is more sensitive to price than urban demand
  3. Aggregate demand for transportation is greater:
    b) In more populated areas
  4. Allocative efficiency is most likely achieved in: Tramp shipping
  5. Infrastructure activity involves: a) Economies of scale
  6. Economies of density imply: d) Two are correct
    • a) The average cost of the infrastructure decreases with traffic
    • c) The network airlines hub-and-spoke model
  7. The cost recovery approach to pricing infrastructure services implies: c) Charging a price equal to average cost
  8. In the case of rail (natural monopoly), if a price equal to marginal cost is established: d) Two correct
    • a) Allocative efficiency is achieved
    • b) The firm obtains normal profits
  9. The problem of peak demand in transportation: d) Two correct
    • a) Is due to systematic changes in demand
    • b) Appears with exogenous shocks in demand
  10. The negative externalities that transportation imposes: a) Implies that the production of transportation is greater than the optimum
  11. In the evolution of new transport infrastructures, it is important to consider: d) All are correct
    • a) The construction and maintenance cost
    • b) The new jobs that are created
    • c) The existence of alternative modes
  12. Cartels are more prone to exist in? d) Two correct
    • a) Air services
    • b) Regular maritime lines
  13. A PPP transportation (Public-Private Partnership): a) Implies a long-term contract between the public and private sector
  14. Different pricing measures to overcome externalities problems include: d) Two correct
    • a) Congestion tolls
    • b) PK policies
  15. Urban mobility policies to reduce congestion include: d) Two correct
    • Bike sharing
    • Low emission zones
  16. Transport infrastructure construction based on efficiency should be built: Where the use of the infrastructures with respect to capacity is higher

Costs

  • Joint Costs: Costs incurred when producing two services where one inherently implies the production of the other.
  • Common Costs: Costs for two services simultaneously, but one does not imply the other.
  • Constant Costs: General company costs not associated with a specific trip or service.
  • User Costs: Costs of price and travel time.
  • Social Costs: Positive and negative externalities.