[Author’s Name]
[Institution’s Name]
Essay on Theory of induced traffic demand
Induced demand is the phenomenon that after supply increases; more of a good is consumed. This is entirely consistent with the economic theory of supply and demand; however, this idea has become important in the debate over the expansion of transportation systems, and is often used as an argument against widening roads, such as major commuter roads. It is considered by some to be a contributing factor to urban sprawl. A journey on a road can be considered as having an associated cost or price (the generalized cost, g) which includes the out-of-pocket cost (e.g. fuel costs and tolls) and the opportunity cost of the time spent traveling, which is usually calculated as the product of travel time and the value of travelers' time. When road capacity is increased, initially there is more road space per vehicle traveling than there was before, so congestion is reduced, and therefore the time spent traveling is reduced - reducing the generalized cost of every journey (by affecting the second "cost" mentioned in the previous paragraph). In fact, this is one of the key justifications for construction of new road capacity.
Research indicates that the elasticity of traffic demand with respect to roadway expansion is between 0 and 1, indicating that a 1% increase in roadway expansion will generate less than a 1% increase in traffic demand. However it is greater than 0%, so new roadway construction will result in some additional traffic that would not have occurred but for the new capacity. In the long term, however, traffic demand may increase by more than 1%, since elasticity of demand is a partial derivative. In other words, this figure between 0 and 1 assumes that, apart from the increased supply, all else is constant............
