Chapter 4

Question 1

Differentiate between primary and derived demand

Answer 1

• Primary demand – passenger transport (leisure,recreation)

* Derived demand – passenger transport (for work), freight transport

Question 2

Economic characteristics of transport provision:

Answer 2

1. Importance of optimal use of capacity (allocation of scarce resources in transport provision), justify investment
   • Economies of scale with fixed assets
   • Opportunity cost of investment
2. Transport as a product cannot be stored
3. Demand for transport differs according to direction
4. Demand for transport not the same at all times
5. Supply of transport subject to control

Question 3

Underutilization of carrying capacity occurs when:

Answer 3

• Idle time is too high – (waiting times, still incur fixed costs)
• Carrying capacity not fully utilized – (aircraft, not enough seats sold, fixed and variable costs still incurred); empty trips
• Loss of potential income

Question 4

How can idle time be shortened? –

Answer 4

• mix of passengers and freight; multi-purpose vehicles

* because it occurs due to imbalance of supply and demand – make use of better planning

Question 5

Transport as a product cannot be stored:

Answer 5

• In the case of passenger transport, production and consumption occur simultaneously
• Underutilized capacity is lost forever

Question 6

Demand for transport differs according to direction:

Answer 6

• Might be empty or underutilized return trips – cost of both legs need to be covered
• Unequal use of infrastructure still needs to be accounted for (maintenance on both directions)
• Cost of goods might increase as well as transport tariffs

Question 7

The demand for transport is not the same at all times of the day: Possible to mitigate this

Answer 7

(a) Transport peak load at non-peak times (push demand down)
(b) Stimulate demand at non-peak times (push demand up)
Both require sacrifices - must lower tariffs

Question 8

Characteristics of passenger transport:

Answer 8

passenger transport makes high demands of the operator - comfort and convenience.
The most important requirements are:
• shelter from the weather
• the provision of seats or bunks and toilet facilities, and
• protection against extreme changes in temperature and atmospheric changes

Also:
•	information system 
•	choice regarding costs and the level of service.
•	High average speed
•	personal safety

Question 9

Solution to unequal distribution of the demand for passenger transport over time and its effect on the utilisation of capacity:

Answer 9

i. An increase in the existing peak capacity by means of expansion.
ii. An increase in the existing peak capacity through better management and planning of services.
iii. The spreading of working hours.
iv. The implementation of an express service

Question 10

Supply of transport subject to control

Answer 10

Laws and regulation may decrease capacity and harm revenue