ETS Chapter 6 Flashcards
Why are transportation costs significant in economic activities?
Transportation costs influence the price of goods, availability of resources, and economic efficiency. Lower transportation costs improve trade and business competitiveness.
Example: A company importing raw materials can sell products at lower prices if transport costs are reduced.
What is a market area in transportation economics?
A market area is the geographic region where a company can sell its products profitably. It is determined by transportation costs and consumer demand.
Example: A bakery in a city serves a 10 km radius where delivery costs are reasonable.
How does transportation cost affect the size of a market area?
Higher transportation costs reduce the size of a market area by making products more expensive at farther distances.
Example: A farmer selling vegetables can only afford to transport them within 50 km before costs outweigh profits.
What factors influence the company’s market selection in relation to transportation?
Factors include transportation costs, demand distribution, competition, and accessibility.
Companies prefer locations with low transport costs and high market reach.
Example: A logistics company chooses a warehouse near highways to minimize fuel costs.
