Transportation economics an introduction – Transportation engineering

Introduction :-

Suppose there is a plan to construct a new highway. What do you think, are all the things that need attention before starting the project? A good highway design? Yes correct, then what else? A better, road geometry, a good lightning system etc etc etc., But what about the cost? If you want it to be viable in terms of costs, the benefits that the highway provides must be very much more than what it costs for. These types of cost-benefit ratio working, is the main back-bone of the TRANSPORTATION ECONOMICSTo learn more about transportation economics some basic knowledge is very essential which has been discussed here clearly. So, if you want to study transportation economics from the scratch you are at the right place. Lets begin.

More better the highway system more is the benefits to the society. Improvement in highway results in benefits like reduction in vehicle operation cost (VOC), saving in travel time, reduction in accidents, improved compared to the passengers etc., 

The movement or flow of people goods from one place to another is possible because of transportation system. Transportation system includes all networks of transportation like roads, streets, rail lines, airways, seaways etc., Transport economics studies the economic side of the larger subject of transportation/travel. Costs of providing and using different modes of transport are weighed, in terms of money, time, and environmental impact.

Basically, before starting we must be well worse with some definitions and their meanings. So here are some basic definitions to start with.


Highway economics or Transportation economics helps in selection of various alternatives proposed for a project
Highway economics or Transportation economics helps in selection of various alternatives proposed for a project

Transportation demand :- The Desire to make trips with the ability to pay for it is called as transportation demand. So, if people are more interested in making huge number of trips, with the ability to pay for it then it is called as the transportation demand.

Transportation supply :- The availability of traffic facilities to make the trip is called as transportation supply. Therefore, more is the transport facilities availability, more is the transportation supply.

The simple laws of market economics cannot be applied to transportation economics. For example the demand for transportation is derived (depends upon various factors) it is not a demand for its own sake. Also each trip is unique in time and space. Hence, a special set of rules for transport economics is required.

In terms of economics, justification for the highway improvement can be given when the travel benefit in terms of reduction in various cost of operations which benefits the road user should be higher then what has been invested on the road. Then only the construction of that particular road is economically justified.

Thus, when multiple alternative for proposed for a road for example, then economic justification is also one of the main criteria to be looked after for selection of an alternative.

For the public, and the management (Government)  economic justification is the only criteria that can be convincing for the selection of a particular alternative. Highway finance deals with various methods of rising and or providing funds for the highway projects.

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Okay, till now we saw economic analysis is important. But, how to do it? What are the  factors affecting it? What factors should we consider to say a project is economically appreciable? Lets discuss them now.

As discussed earlier, only thing that we should know for economic analysis is the cost involved and the benefits obtained. However there are some other methods, which we will be discussing here in website.

Costs and Benefits :-

Costs :-  All the  monetary associated investment is called as cost of the project. Cost for a particular  road Project involves:-

  • The cost of materials involved for the road construction activity
  • Earthwork and site clearance work cost
  • Transportation cost for bringing materials
  • Cost of annual maintenance
  • Human resource cost for salary and wages of all the workers and engineers involved in the work
  • Cost of land acquisition etc.

As you can notice here, all the cost that are mentioned here are quantifiable or measurable.

Benefits :- Benefits are the advantages that is obtained from the construction of roads. Various benefits of construction of road includes:-

  • Decrease in the vehicle operation cost
  • Decrease in the accidental rates
  • Increase in mobility
  • Saving in time of travel etc.,

Some of the benefits are measurable or quantifiable and some of them or non quantifiable or non measurable benefits.

Hence, the Non – quantifiable benefits can be however converted to some kind of monetary values for easier comparison with monetary values of costs and economic evaluation of the highway can be done.

So, hence these are some of the basics and a foundation (an introduction) important to understand the highway/transportation economics in details.

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