Question

Non-cash costs play an important role in the supply and demand of transportation. Explain the concept of generalized costs and use appropriate economic models to illustrate how generalized costs affect demand in the following situations: a) Intermodal competition b) Road congestion

Answer 1

In transport economics, the generalized cost s the sum of the monetary and non monetary costs of a journey. Monetary costs might include a fare on a public transport journey, or the cost of fuel, wear and tear and any parking charge, toll or congestion charge on a car journey.Non monetary cost refer to the time spent undertaking the journey. Time is converted to a money value using a value of time figure, which usually varies according to the traveler's income and the purpose of the trip. the generalized cost is equivalent to the price of the good in supply and demand theory, and so demand for traveler's can be related to the generalized cost of those journeys using the price elasticity of demand. supply is equivalent to capacity on the network.

intermodal transport is the movement of goods in one and same loading unit or vehicle that successively uses two or more modes of transport without handling the goods themselves in the changing modes. Intermodal transport solutions, implying non road freight transport on the long haul, can contribute to the advance of more energy efficient transportation systems. The required long haul distance required to make intermodal transport preferable increases when handling costs at terminals increases, total transport distance increases, distance depends marginal generalized costs for rail increases, the distance dependent marginal generalized costs for truck decreases and reduced resting costs for truck drivers. Direct cost of congestion to business arise through an increase in the generalized cost of transport. That is, businesses absorb costs through the cost of increased value of time and vehicle operating costs. These cost are closely linked to use of transport systems.