TRANSPORT, TRANSPORT TRENDS AND THE ECONOMY

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1 TABLE OF CONTENTS End User Licence Agreement 7 Publisher Notice 7 1 TRANSPORT, TRANSPORT TRENDS AND THE ECONOMY (10%) What is transport economics? Transport modes? How is transport usage measured? What is the importance of transport to the economy? Why is freight transport important? What is infrastructure? Transport infrastructure is? Types of transport infrastructure? Why is transport infrastructure important? Explain transport operations The role of the public sector in transport operations? What is the Department for Transport How do economists judge the performance of transport operators? What are the main characteristics of transport? What are the advantages and disadvantages of a given mode or transport? How does transport contribute to social exclusion? Demand for Transport What is the demand for transport? What factors affect the demand for transport? Explain derived demand Illustrate off peak and peak time demand What is peaking? Congestion is? What is loading? Why has the demand for road transport risen particularly sharply? Why have petrol prices increased displayed volatility? Elasticity & Transport What is the difference between qualitative & quantitative analysis What is the concept of elasticity Why is elasticity an important concept? How are percentage changes in a variable calculated What are the main types of elasticity? How can transport operators make use of PED? How can transport operators make use of YED? How can firms make use of XED? Analyse the impact of elasticity on transport on each mode of transport Elasticities for transport modes are? How do economic growth rates influence demand for transport? Recent Trends in Transport Usage Outline recent passenger transport usage trends Comment on distance travelled and GDP Has the real cost of travelling changed in the last 20 years? Outline recent passenger transport usage trends UK transport trends by mode Describe key current UK transport trends for each main transport mode What are the current UK transport trends for road transport? Current UK trends for buses? What are the current UK transport trends for railways? What are the current UK transport trends for air transport? Estimating and Forecasting Transport Data What is a forecast 16 Tutor2u Transport Economics Q&A 2006 Edition Richard Young Page 2

2 1.6.2 Why are transport forecasts made? Forecast methods are? Error! Bookmark not defined Explain the Delphi technique Error! Bookmark not defined What is historical analogy Error! Bookmark not defined Are qualitative methods appropriate? Error! Bookmark not defined Quantitative forecasting methods are The assumptions in quantitative forecasting? Explain time series data What is a time series graph Explain and illustrate extrapolation What is an economic model Why might forecasts be wrong? How are transport forecasts made? How reliable are transport forecasts? Error! Bookmark not defined What are the main problems firms experience in estimating elasticities Can the government change transport trends? 17 2 MARKET STRUCTURE & COMPETITIVE BEHAVIOUR IN TRANSPORT MARKETS What is market structure? How do market structures differ? State the types of market structure What is competition? What are competitive markets? Define market power Explain concentration ratio How does competition influence pricing decisions? Objectives and Stakeholders Define objectives The objectives of producers are? State typical business objectives Ownership management & control mean? Shareholder and stakeholder are? Who are the major stakeholders in a transport market? Can objectives of different stakeholder conflict? Are firms always profit maximisers? Efficiency in Transport Industries How is economic efficiency achieved? What is efficiency in economics? Explain economic efficiency What is an efficient allocation of resource allocation? How is economic efficiency achieved? What are the conditions for allocative efficiency? What is productive efficiency What are the conditions for productive efficiency - lowest short run unit cost? What are the conditions for productive efficiency exploiting economies of scale? Define the types of economies of scale What the implications of productive efficiency Is productive enough for efficiency? Technical efficiency What is X-inefficiency What is the link between allocative efficiency and the economic problem? How can a given level of output be allocatively efficient? Define allocative efficiency The condition of for allocative efficiency? Why is allocative efficiency good? Measure value and consumer benefits from consumption How can allocative efficiency in transport be illustrated? How can competition lead to an efficient allocation of resources? Is perfect competition always best? What are the benefits from competition Explain non price competition Compare static efficiency in perfect & imperfect competition using graphs Do markets work? Do markets fail? Perfect Competition 25 Tutor2u Transport Economics Q&A 2006 Edition Richard Young Page 3

3 2.4.1 Explain the model of perfect competition Illustrate short run equilibrium in perfect competition Is the perfect competition useful? Monopolistic Competition Explain the model of monopolistic competition Illustrate profits in monopolistic competition Give examples of monopolistic competition in transport Oligopolies Oligopoly is? What are the characteristics of an oligopolistic market? Why are prices stable in oligopoly? Outline price fixing & collusion What is a collusive oligopoly? What is a kinked demand curve? Explain the shape of a kinked demand curve The kinked model predicts? What are concentration ratios? Explain predatory pricing What is market dominance? What is a franchise? Monopoly Explain the model of pure monopoly Why do profit maximising monopolists under produce? How do transport monopolies arise? How are transport monopolies maintained? What are economies of scale? How is the natural monopoly argument applied to transport? Do natural monopolies inevitably earn abnormal profits? What are the benefits created by monopolies? Define types of integration? Why do firms integrate? Contestability Theory Barriers to entry What prevents new firms entering a industry? Define a contestable market and list its characteristics What is contestability theory? Sunk costs are? The impact of new entrants is? Are profits low in contestable markets? How are contestable and perfectly competitive markets different? What are the characteristics of a contestable market? Are transport markets contestable? How do transport firms match the models of market structures What is the relationship between efficiency and market structure in transport? Price Discrimination What is price discrimination? Conditions are needed for price discrimination? What is 1 st and 2 nd degree price discrimination? What is 3 rd degree price discrimination? Privatisation & Deregulation The private and public sectors are? Describe how the transport industry in the UK has been privatised; What are the arguments for privatisation? What are the arguments against privatisation ie for nationalisation? What is PFI? Explain regulation How are utilities regulated? Describe methods of regulation Deregulation is? Why deregulate? How can the government deregulate? Does regulation always work? Bus Transport: Privatisation & Deregulation Outline the Transport Acts of 1980 & Tutor2u Transport Economics Q&A 2006 Edition Richard Young Page 4

4 Evaluate the impact of deregulation in road passenger (bus) in the UK Are local bus companies contestable? What is current government policy on buses? How can bus operators be assessed? Air Transport: Privatisation & Deregulation What are the main problems facing air transport? How is air transport taxed in the UK? Does air transport generate negative externalities? What are the potential government policies for air transport? Evaluate the impact of deregulation of air transport in the UK? Describe the National Air Traffic Services (NATS) has been privatised Rail Industry: Privatisation & Deregulation How is the rail industry organised in the UK? Why have UK railways been privatised? What is Network Rail How can privatisation be assessed How are TOCs faring? 38 3 RESOURCE ALLOCATION ISSUES IN TRANSPORT (30%) Transport policy objectives are What are the main transport problems facing the government? What is current government s transport policy? What are the main government White Papers on Transport? Transport policy objectives are? How do objectives allow evaluation Outline current Government Transport strategy What is best allocation of resources? Why is the best allocation of resources not always possible? What is an integrated transport policy? How are resources allocated in the transport sector? What are the special characteristics of transport investment? Is road space a pure public good? What are quasi-public goods? Private Funding Initiative Public Private Partnerships and the Private Funding Initiative Why is the PFI needed to resource public transport investment? What are Public Private Partnerships? A PFI alternative How does the govt decide if a PPP offers value for money? How can private sector involvement in transport investment be evaluated? What are the arguments for the Private Funding Initiative? Why are Private Funding Initiatives in transport criticised? Examples of PFI transport projects Is the Private Funding Initiative a success in transport? Transport Costs: fixed, variable and semi fixed The cost structure of the main modes of transport operations Give examples of fixed, variable and semi fixed costs What is the role of economies of scale in vehicle size? Are load factors important? Externalities in Transport What are external costs? What are the external costs of transport? Social costs & social benefits are? The link between social cost & benefits & opportunity cost? Can costs and benefits always be expressed in monetary terms? What is the track costs argument? How are the costs of traffic congestion calculated? Investment Appraisal & Cost Benefit Analysis How are transport infrastructure projects best evaluated? What are Appraisal Summary Tables? How is Cost Benefit Analysis used to evaluate transport projects How is a transport CBA undertaken by the Dept of Transport What are the limits of COBA? How does COBA estimate direct user benefits? What are the limitations of the CBA approach to transport decision-making? 47 Tutor2u Transport Economics Q&A 2006 Edition Richard Young Page 5

5 3.5.8 Give an example of CBA projects 47 4 MARKET FAILURE AND TRANSPORT POLICY (30%) Market failure is? Why can market failure occur? How are externalities valued? Ex-ante and ex-post valuation methods Why is traffic congestion in urban areas a good example of market failure? Is congestion a problem for the UK? Illustrate market failure from congestion How can congested roads be rationed? What are the consequences of road pricing? Explain hypothecation Policies for tackling Market Failure What can be done about market failure? What is the polluter pays principle? What is the role of taxation in dealing with negative externalities? How do governments intervene in markets? What is the role of government in transport policy? What are supply policy options for combating congestion? What are demand policy options for combating congestion? Subsidies Why subsidise railways? (market failure argument) Why subsidise railways? How effective are subsidies in encouraging commuters to switch from road to rail? Sustainability What is the nature and meaning of sustainability in transport? What are sustainable forms of transport? Is road transport sustainable? How is sustainability monitored? Give examples of sustainable transport issues How can economists help quantify sustainability issues? How can CBA help in sustainability issues? What was the Royal Commission of Environmental Pollution? Congestion Charging in Practice Explain congestion charging in London Give arguments for and against road pricing Is congestion charging a success in London? Durham Singapore Greece Melbourne Germany Lorry Toll Scheme What is the Transport Innovation Fund (TIF) The M6 Toll 57 5 EXAM TECHNIQUE What are assessment objectives? What are command words? Why are command words important What is the economists toolkit? Explain evaluation Give examples of evaluation techniques Give examples of evaluation phrases Other Revision Advice 62 Tutor2u Transport Economics Q&A 2006 Edition Richard Young Page 6