CONDITIONS OF EQUILIBRIUM IN TRANSPORT MODEL

Transcription

1 Journal of Information, Control and Management Systems, Vol. 6, (2008), No CONDITIONS OF EQUILIBRIUM IN TRANSPORT MODEL Rudolf KAMPF, Libor ŠVADLENKA University of Pardubice, Jan Perner Transport Faculty, Czech Republic kampf@upce.cz, libor.svadlenka@upce.cz Abstract The paper deals with the basic principles of economic equilibrium in transport system. At the concrete it shows conditions of macroeconomic equilibrium in transport system, the factors influencing supply and demand and then some practical transport models coming out from the principles of supply and demand equilibrium. Keywords: demand, equilibrium, economic, transport, model, supply 1 BASIC PRINCIPLES OF ECONOMIC EQUILIBRIUM IN TRANSPORT MARKET The Principles of supply and demand in transport sector coming-out from the basic economic rules, which are generally valid also in other economic sectors. If we would coming-out from this premise, the market equilibrium occurs (and not only in transport sector) at such price and quantity, when the supply and demand are balanced. At this price and quantity the amount of goods (services), which consumers would like to buy are balanced with the amount of goods (services), which sellers would like to sell [8]. Equilibrium price and quantity are then constant as long as the other conditions will be constant. Following Figure 1 shows equilibrium price and quantity as a point of intersection of supply and demand curve [2]. If economic equilibrium arises when supply and demands are balanced, then it is imperative to determine factors, which have the influence on supply and demand. This shows following Table 1 and Table 2.

2 76 Supply and Demand in Transport Model Figure 1 Market equilibrium Table 1 Examples of factors influencing the supply Factors influencing the supply Price Production costs: - technology - input prices Prices of substitution products Market organisation Other factor Examples Higher price makes the goods more attractive for producers (higher profit) so it increases the supply New car engines decrease the petrol consumption, thereby also the transport costs. So it increases the supply. Higher prices of petrol increase the costs, thereby decrease the supply Lower the prices of railway transport increase the supply of road transport Liberalisation of railway transport increases the supply of railway transport Lower the taxes of road transport probably increase the supply of road transport Table 2 Examples of factors influencing the demand Price Factors influencing the demand Average income Examples Higher price makes goods less attractive for consumers so it decrease the demand quantity Higher incomes increase for example car demand

3 Journal of Information, Control and Management Systems, Vol. 6, (2008), No Factors influencing the demand Population Prices of substitution products Hobbies Other factors Examples More people mean more potential consumers, so it also increase car demand Lower the petrol prices increase car demand Using individual kind of transport on the basis of other uneconomic criterion Accessibility of railway transport etc. 2 PRACTICAL EXAMPLES OF SUPPLY AND DEMAND EQUILIBRIUM The instruments of supply and demand don t ever work only in static and constant conditions, but especially in dynamic conditions, i.e. conditions which are changed permanently. Following Figure 2 shows utilization of dynamic model of supply and demand net on the example of traffic-jam [3]. Figure 2 Supply and demand net The numbers in Figure 2 mean: 1 Demand increase at constant price 2 Resulting price increase due to traffic-jam 3 Demand answer to traffic-jam 4 Reduction in demand decreases traffic-jam 5 The process converges to solution Further example of the practical application of the supply and demand equilibrium can be the model tax expansion effect. This model (see Figure 3 and Figure 4) shows impacts of tax expansion (at the concrete imposing the transport road tax) on the number of journeys realized by individual users in case of elastic and inelastic supply and demand [2].

4 78 Supply and Demand in Transport Model Figure 3 Social effect of tax expansion in case of inelastic demand and supply Figure 4 Social effect of tax expansion in case of elastic demand and supply There is evident that the lost costs will be much lesser in case of inelastic supply (coming out from marginal costs) and demand (representing the marginal utility) than in case of elastic supply and demand, when we impose the tax on a subject such as the transport road (see Figure 3 and Figure 4). So it is obvious that the smallest impact will have (if the other conditions will be the same) such tax expansion, which refer to

5 Journal of Information, Control and Management Systems, Vol. 6, (2008), No products and services with inelastic demand, i.e. demand relatively independent on product and services price. 3 THE EQUILIBRIUM IN TRANSPORTATION NETWORK 3.1 The Analysis of customer s behaviour (demand) It s obvious that the analysis of equilibrium in transport system is necessary to start with the analysis of transport system user s (customer s) behaviour, who values, according his preferences, during his choice many crucial factors. Some of them can have non-quantified character (e.g. comfort, safety) Main aim is utility maximization or (if you like) finding optimal option of satisfaction his need [1]. As deciding factors for these decisions about choosing transport service is possible to accept time and price. Time horizon of transport service is not only actual time spent in mount, but also the secondary time (arrival to station, waiting on connection, delivery of consignment). So it s about finding combination of price and hauling season with maximal utility for user. For imagery this situation we can start from indifference analysis using indifference curve, as a representation of consumer s combinations (preferences) with the same utility. Figure 5 Indifference curve and indifference map From characteristics of indifference curves is obvious, that points A, B, C laying on indifference curve (Figure 5) present different combinations of the price and time, which give to user the same total utility (the user is towards these combinations indifference) On the indifference map are shown indifference curves with different total utility [7]. Total utility can be mathematically interpreted as a function [5]: U = f (S, θ), Where

6 80 Supply and Demand in Transport Model U is utility, S is vector of level delivering services S = (t, p), so time and price, θ is vector of values, or let us say evaluation parameters of time and price θ = (α, β). Vector of values reflects individual customer s preferences, trade-off these parameters could be expressed as a rate of α/β. User s decision making about the transport service goes out not only from his preferences, but it s also influenced by his market possibilities (his income in relationship to prices of single transport services) [4]. We moor e.g. that user decides to realize his journey by air transport or by road transport. Consumer s choice from point of view of his market possibilities could be illustrated by budget line, which represents a maximal accessible combination of allocation consumer s income for purchase two in our case transport services (Fig. 6). The budget line could be expressed by equation [5]: I = Px. X + PY. Y where: I consumer s disposable income PX, PY prices of journeys, which were realized by road transport (X) and air transport (Y) X, Y amount of journeys realized by road transport (X) and air transport (Y) Figure 6 Indifference curve and indifference map Where: X Amount of journeys realized by road transport Y Amount of journeys realized by air transport As it was said, the user chooses such a transport service which maximizes his utility. Now we specified that choosing this optimum depends on user s preferences and his market possibilities. If we start from above-mentioned example of choosing combination of trips realized by road and air transport, then we could graphically find optimal user s choice in the point of intersection (point E on the Figure 7) budget line and the most achievable indifference curve (representing in this case combination of

7 Journal of Information, Control and Management Systems, Vol. 6, (2008), No amount of journeys realized by road (X) and air transport (Y) with the same user s utility) [6]. Figure 7 Consumer s equilibrium 3.2 The Analysis of Transport Company s behaviour (supply) The base of the supply analysis is the costs analysis. The supply of transport services depends on marginal costs. Figure 8 The costs of company offering transport services Where: MC marginal costs, AC average costs, AVC average variable costs, AFC average fixed costs, Q Amount of supplied services Analyzing these three costs we can reach to the three basic situations [5]: 1. MC < AC each other production unit needs higher costs than the previous one. Average costs decrease, their curve is decreasing. Economics is increasing amount of supplied transport services.

8 82 Supply and Demand in Transport Model 2. MC > AC other production unit could be realized only with higher costs than the previous units. So average costs are increasing and they have upwardsloping curve. MC increase above level of AC other increasing of providing transport services is uneconomical providing services are more expensive. 3 MC = AC average costs are minimal. The volume of providing services is optimal in point in which marginal costs = average costs. In this point the average costs must be minimal it passes also for the average variable costs (AVC). Likewise in customer s behavior analysis or during finding his optimum is used indifference curve and budget line, in analysis of Transport Company s behavior (subject which supplies its services on the market) is used isoquant (indifference production curve) and isocost. Isoquant is analogical to indifference curve on supplement side i.e. it gathers combination of factors of production for the same level of production. Isoquant is always connected with specific output level. The map of isoquant is analogical with an indifference map. On the axis aren t final products (services), but inputs work and capital. Isocost (the line of the same total costs) is analogical with budget line. Isocost contains all maximal combinations of work and capital, which could be purchased in an existing total costs. Its equation is [5]: TC = PL.L + PK. K TC total costs, PL price of work unit, PK price of capital unit, L level of used work, K level if used capital. The company s optimum, i.e. optimal combination of inputs, is situated as well as consumer s optimum in point where the line of the same total costs (isocost) contacts isoquant (Figure 9). Figure 9 Company s optimum

9 Journal of Information, Control and Management Systems, Vol. 6, (2008), No For every company, not only the transport one, is important in current overhang of supply and demand differentiation from other companies by using pricing or nonpricing competitive techniques, so decreasing price in purpose to control market and customer, next qualitative parameters like term of delivery, integrity of consignment, safety transport, seasonableness, creating image, equipment in mounts etc. 4 CONCLUSION Finally it is necessary to emphasize that although the transport system have to fully respect the basic market principles (relationship between supply and demand) there are other especially macroeconomic factors (for example national laws, EU directives, international agreements) influencing this transport system. It follows from global character of transport. Basic structure of the real transport model is then always only the part of self-contained (superordinate) socio-economic society system. Note: The article is published within solution of research proposal VZ-MSM The transport systems theory. REFERENCES [1] ALÁČ, P., HITKA, M. Tendencie vývoja nákladnej dopravy v Európe. Zborník referátov zo seminára Logisticko-distribučné systémy. TU Zvolen 1997, s 5-7. [2] BECKOVÁ, H., KAMPF, R. Economic Aspects of Transport Modelling. In Financování dopravy možnosti a realita. 6. Mezinárodní vědecká konference. Praha, ISBN [3] KALAŠOVÁ, A., PAĽO, J. Dopravné inžinierstvo organizácia a riadenie dopravy. EDIS vydavateľstvo ŽU v Žiline, 2003, 162 strán. ISBN [4] MADLEŇÁK, R. Logistika jako kľúčový faktor úspechu pri elektronickom obchodovaní. Žilinská univerzita, ISBN [5] SAMUELSON, P. A.; NORDHAUS, W. D. Ekonomie. Druhé vydání. Praha: Nakladatelství Svoboda, s. ISBN X. [6] ŠVADLENKA, L. Rovnováha v dopravním systému. Podniková ekonomika a manažment. Žilinská univerzita II/2006. s ISSN [7] WILKINSON, N. Managerial economics. First edition. Cambridge : Cambridge University Press, p. ISBN

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