The law of demand as a rule of thumb states that when the price of any good or service rises the quantity demanded for this aforementioned good or service will fall. It is more significant to find out the level of such fall in quantity demanded, thereby ascertaining the price sensitivity of consumers. In light of the above we look at the concept of price elasticity of demand to understand changes in consumer travel patterns i.e the effect due to the change in transport prices ie the cause. At the end of this essay we learn the importance of price elasticity of demand for Transport policy and decision making and Setting the appropriate fare.
2 Passenger transport basic concepts. It is essential to define the concept of transport and distinguish it from mobility and traffic before we go further. Transport is defined as the movement of people freight or information. Our area of concentration here is people i.e passenger transport. Below are the key statistical parameters applicable to passenger transport. Number of trips, journeys. Passenger kilometres pkm. Utilization rate pkm pkm Cap 100. Also below are the modes of transport and their specific means applicable to passenger transport and not freight transport. Modes of transport Means of transport Road, Transport, Motor Vehicles Vehicles without Motor Rail Transport Rail Vehicles Inland Navigation Inland Waterway Vessels, Maritime transport, Ocean going vehicles, Air transport ,Airplanes.
This is of course also due to the different magnitudes of the modes A decrease of 1 of car use for commuting induces a rise of 4 2 in use of public transport. c The demand for public transport is far less sensitive to fuel prices the overall cross price elasticity amounts to 0 07 6. Conclusion. With respect to increase in fuel prices and the abovementioned comparatively low price elasticity related to automobile use i.e 0 102 we conclude the following. a A rise in fuel prices will lead to a small decline in passenger kilometers travelled which will result in a slight reduction of pollution. b For the travel purposes of work and business there is hardly any reaction to the increase in fuel prices from the people.
c On the contrary, there will be a comparatively larger decrease in passenger kilometers driven by automobiles for leisure and holiday purposes. d From a transport policy perspective there will be additional tax revenues in the short term. e For peak load traffic such as work and school the price induced modal shift will ensure that public transport ridership is benefitted.