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1.201: An Introduction Moshe Ben-Akiva 1.201 / 11.545 / ESD.210 Transportation Systems Analysis: Demand & Economics Fall 2008 1Outline 1. Context, Objectives, and Motivation 2. Introduction to Microeconomics 3. Introduction to travel demand 4. Course Structure 2Context for Transportation Systems Analysis ● Conceptual View of TSA ● Models and Prediction ● Prediction in Context: Analysis and Implementation 3 Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979A Conceptual View of TSA 3 elements in transport system problems: • Transport system, T • Activity system, A • Flow pattern, F T A F III I II Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979 4A Conceptual View of TSA 3 types of inter-relationships: Type I: Flow determined by both Transport and Activity systems • the short-run "equilibrium" or outcome • many problems are dynamic rather than static Type II: Flow pattern causes change over time in the Activity system through services provided and resources consumed Type III: Flow pattern also causes changes over time in the Transport system • transport operator adds service on a heavily-used route • new highway link constructed Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979 5Models and Prediction 6 Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979 ?OptionsImpactsTechnologyUserOperatorPhysicalFunctionalGovernmentalNetworksLink characteristicsVehiclesSystem operatingpoliciesOrganizationalpoliciesTravel optionsOther activityoptionsFigure by MIT OpenCourseWare.Models and Prediction 7 Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979 OptionsImpactsTechnologyUserOperatorPhysicalFunctionalGovernmentalNetworksLink characteristicsVehiclesSystem operatingpoliciesOrganizationalpoliciesTravel optionsOther activityoptionsServicemodelResourcemodelEquilibriummodelDemandmodelActivityshiftmodelFigure by MIT OpenCourseWare.Prediction in Context 8 Source: Manheim, M, Fundamentals of Transportation Systems Analysis, 1979 Figure by MIT OpenCourseWare.OptionsA. PredictionImpactsTASREDAOptionsPredictionSearchEvaluation and ChoiceImpactsTAB. Analysis CycleObjectives of this Course ● Build the economic framework to analyze the supply and demand for transportation ● Develop methodologies for predicting transportation demands and costs ● Demonstrate how principles of economics can be applied within the context of transportation systems to understand the effects of different plans and policies 9Why Study Transportation Economics? (I) ● Example 1: High-Speed Rail – Has been successful in Japan, China, and some European countries, but no experience in the US – Is the demand going to be sufficient to justify the high costs? – Demand forecasting is complicated Quality of Service (Supply) Land Use Demand 10Why Study Transportation Economics? (II) ● Example 2: Traffic Jams – Building more highways – Intelligent Transportation Systems – Encouraging transit ridership – Pricing 11Why Study Transportation Economics? (III) ● Example 3: Trucks in the Alpine Valleys – Highways in narrow valleys trap noise and exhaust fumes from the trucks – In 1994, Swiss voters decided to close highways to truck traffic beginning in 2004 – How should one evaluate this decision? – What are the benefits and costs of this decision? – How to compare costs to the trucking firms with the environmental impacts? 12Outline 1. Context, Objectives, and Motivation 2. Introduction to Microeconomics 3. Introduction to travel demand 4. Course Structure 13What Is Microeconomics? ● Branch of economics that deals with the behavior of individual economic agents – consumers, firms, worker, and investors – as well as the markets that these units comprise. 14Demand and Supply ● Market demand function – Represents behavior of users ● Market supply function – Represents congestion and behavior of service providers ● Supply/Demand Interaction: Equilibrium 15Equilibrium Price S P0 D Q0 Quantity 16Shifting Curves Price S D ? S’ P0 D’ Q0 Quantity 17Comparative Statics ● Create a model of market behavior: – Explain consumer and firm choices as a function of exogenous variables, such as income and government policy ● Develop scenarios: – Changes in exogenous variables ● Derive changes in the endogenous variables 18Comparative Statics Example The market for taxi service: ● Supply model: QS = -125 + 125P ● Demand model: QD = 1000 – 100P ● Where does the market clear? ● What happens if demand shifts such that now QD = 1450 – 100P ? 19The Solution S D Price 5 D’ 7 500 750 Quantity 20Consumer Behavior How do we characterize a consumer? ● Preferences across goods ● Prices of goods ● Budget available to spend on those goods 21Utility Function U = f(x1, x2, …, xm) Consumption levels of goods 1..m ● A function that represents the consumer’s preferences ordering ● Utility functions give only an ordinal ranking: – Utility values have no inherent meaning – Utility function is not unique – Utility function is unaffected by monotonic transformation 22Consumer Behavior ● Assumed behavior by consumer: utility maximization subject to budget constraints ● When facing prices p and having income I, consumer allocates income across goods so as to maximize utility. ● Problem: Max U(x1,…, xm) subject to m ∑ pixi ≤ I i=1 23Demand Function ● Optimal consumption bundle X* ● By varying price p and income I and solve for X*, we derive the demand function X*(p, I) p I3 I2 I1 X* 24Consumer Welfare 25 Quantity Price Price_0 Price_1 Demand Welfare gainfrom decrease in priceFirm Behavior How do we characterize a firm? ● The technology and inputs for creating products ● The prices of the required inputs ● The demand for the firm’s product(s) 26Production ● Technology: method for turning inputs (including raw materials, labor, capital, such as vehicles, drivers, terminals) into outputs (such as trips) ● Production Possibility Set: quantities of output possible given levels of input 27Possibility Set ● The firm may choose to produce any element in its production possibility set ● Example: taxi services and drivers 28 Drivers Taxi service y2 y1 Possibility SetProduction Functions ● Simplified form: q = f(z) – q: output; z: inputs ● Isoquants for two-input production: 29 Labor (L) Capital (K) q1 K* L*


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