transport economics: resource allocation. costs in transport three types: private costs external...
TRANSCRIPT
Transport Economics: Resource Allocation
Costs In Transport
• Three Types:
• Private Costs
• External Costs (externalities)
• Social Costs =Private Costs + External Costs
Efficient Resource Allocation In Transport
• As we know efficient resource allocation in markets exists where MC = MR.
• In the case of transport we can say that efficient resource allocation will exist at MSC = MSB.
Efficient Resource Allocation In Transport
Cost/Benefit
quantity
MSC
MSB
Optimum allocation
Cost/Benefit
Optimum allocation
Cost/Benefit
quantity
MSC
MSB
Optimum allocation
Cost/Benefit
Optimum allocation
Efficient Resource Allocation In Transport
• However as we know in many markets this is not the case as private costs fail to reflect social costs of
provision.
• Therefore the market does not allocate resources at the socially optimum point.
• What, therefore are these
costs?
Cost/Benefit
quantity
MSC
MSB
Cost/Benefit
Optimum allocation MPC
Private Costs of Transport
• These Fall into Two Categories:
• Fixed costs: the costs of making transport vehicles available for use.
• Variable costs: costs dependant on the way in which transport vehicles are used and the level of service available.
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars
Heavy Goods vehicles
Rail
Air
Sea
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars Capital costs, insurance, road tax, depreciation
Fuel, Maintenance, Tyres
Heavy Goods vehicles
Rail
Air
Sea
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars Capital costs, insurance, road tax, depreciation
Fuel, Maintenance, Tyres
Heavy Goods vehicles Capital costs, Licenses, insurance, depreciation, depot costs
Fuel, maintenance, drivers wages
Rail
Air
Sea
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars Capital costs, insurance, road tax, depreciation
Fuel, Maintenance, Tyres
Heavy Goods vehicles Capital costs, Licenses, insurance, depreciation, depot costs
Fuel, maintenance, drivers wages
Rail Track costs, capital costs, interchange costs.
Fuel, maintenance, labour costs
Air
Sea
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars Capital costs, insurance, road tax, depreciation
Fuel, Maintenance, Tyres
Heavy Goods vehicles Capital costs, Licenses, insurance, depreciation, depot costs
Fuel, maintenance, drivers wages
Rail Track costs, capital costs, interchange costs.
Fuel, maintenance, labour costs
Air Capital costs, administrative and overhead charges.
Fuel, maintenance, landing charges, in-flight services, labour costs
Sea
Private Costs of Transport
Mode of Transport Fixed Costs Variable Costs
Private Cars Capital costs, insurance, road tax, depreciation
Fuel, Maintenance, Tyres
Heavy Goods vehicles Capital costs, Licenses, insurance, depreciation, depot costs
Fuel, maintenance, drivers wages
Rail Track costs, capital costs, interchange costs.
Fuel, maintenance, labour costs
Air Capital costs, administrative and overhead charges.
Fuel, maintenance, landing charges, in-flight services, labour costs
Sea Capital costs, insurance, administration and overhead charges
Fuel, maintenance, in-voyage costs, harbour costs.
Private Costs of Transport
• N.B. – the are marked differences between modes of transport in terms of the ratio of fixed to variable costs.
• E.g. Railway operation incurs heavy fixed costs however once a track is open for use the average cost per train falls as the no. of trains using the line increases.
The External Costs of Transport
• Pollution: Climatic, Visual and Noise.
• Community severance and Damage from Vehicles.
• Accidents
• Congestion
External Costs of Transport
• In order to account for these external costs we implement an indirect tax of a,b,c in order to internalise these costs
to the producer and the consumer. Cost/Benefit
quantity
MSC
MSB
Cost/Benefit
Optimum allocation MPC
ac
b
Figures
Track Costs Argument