Transport
Specification
Definition of transport, transport modes and modal characteristics for the
movement of passengers and freight.
Transport as a derived demand.
Transport & Infrastructure
“Transport is the movement of people or goods for various personal and business
reasons.”
It includes:
The means or mode of transport that is used. For example; buses, train, lorry.
The infrastructure that is required to allow that vehicle to operate successfully. For
example; roads, air space and sea channels. Also we need to be aware of the
facilities like train stations, distribution centres and airports.
You will need to become familiar with developments in the following transport
markets: airlines and airports, roads
Transport Modes and Characteristics
You need to be familiar with the pros and cons of the following methods of transport for
both passenger and freight.
Passenger:
Mode of Transport Infrastructure Pros Cons
Required
Road – private car
Road – bus
Rail
Air
Sea – ferries
,Freight:
Mode of Transport Infrastructure Pros Cons
Required
Road – lorries
Rail
Air
Sea – container
ships
Transport as a Derived Demand
“Derived demand occurs when the demand for a particular product depends on the
demand for another product or activity.”
Goods
Leisure Work
Transport
Drivers of demand for transport
Passengers: Price, prices of substitutes, income, quality
Freight: Price, prices of substitutes, speed and quality of services, nature of goods
to be moved
Past Paper Questions
Topic Questions
Definition of transport, Using Fig. 1, what evidence is there to suggest that Stuttgart had been more
transport modes and successful than Edinburgh or Bristol in reducing reliance on the car? (2 marks) (June
modal characteristics 2011)
for the movement of What is meant by the term ‘transport infrastructure’? (1 mark) (Jan 2013)
passengers and Explain one possible advantage to freight operators of using rail as a mode of
freight. transport. (2 marks) (Jan 2013)
Transport as a derived Explain why the demand for air transport can be said to be a ‘derived’ demand. (2
demand. marks) (June 2010)
Analyse why the demand for passenger and freight transport is a derived demand.
(15 marks) (June 2012)
, Market Concentration
Specification
Market concentration.
Definition
“’Market concentration’ is the degree to which the output of an industry is dominated
by its largest producers.”
In other words, how many of the sales in the market are accounted for by the biggest
firms in that market.
Firm Sales (£m) % Market Share
A 56
B 43
C 22
D 12
E 3
F 1
Total 100%
Calculate the 3 firm concentration ratio of this market.
3 firm concentration ratio = __________________________________________________________
This means:
A highly concentrated market is a market which is dominated by a small number
of firms (oligopoly)
We say a market becomes more highly concentrated as fewer firms dominate a
larger share of the market
Lots small firms and One large firm, no
competition – low competition – high
market concentration Mergers & acquisitions market concentration
The Impact of Increased Concentration
You need to be familiar with impact of increased market concentration on a market,
and that this can be caused by mergers and acquisitions between companies.
Benefits of increased concentration:
, Firms gain from economies of scale
The natural monopoly argument
Dynamic efficiency gains
Use of supernormal profits for efficiency gains
Use of supernormal profits to innovate
Drawbacks of increased concentration:
Lack of competition between firms
Firms may be productively and allocatively inefficient
Higher prices and reduced output
Less incentive to innovate
Evaluation of Increased Market Concentration
The impact of increased concentration may depend upon the extent to which
transport markets are regulated.
The impact may depend upon the extent to which existing dominant firms fear
entry by other firms (ie degree of contestability)
The impact may depend upon exactly how many firms there are in the market.
For example, despite a rise in concentration, if there are still a number of firms
fiercely competing against each other, then a more competitive market
structure may exist in reality.
Past Paper Questions
Topic Questions
Market Discuss the effects of increased concentration in transport markets. (20 marks)
concentration. (June 2010)
Explain the impact on market concentration of a merger between Thompson
Airways and Thomas Cook Airlines. (2 marks) (June 2012)
Specification
Definition of transport, transport modes and modal characteristics for the
movement of passengers and freight.
Transport as a derived demand.
Transport & Infrastructure
“Transport is the movement of people or goods for various personal and business
reasons.”
It includes:
The means or mode of transport that is used. For example; buses, train, lorry.
The infrastructure that is required to allow that vehicle to operate successfully. For
example; roads, air space and sea channels. Also we need to be aware of the
facilities like train stations, distribution centres and airports.
You will need to become familiar with developments in the following transport
markets: airlines and airports, roads
Transport Modes and Characteristics
You need to be familiar with the pros and cons of the following methods of transport for
both passenger and freight.
Passenger:
Mode of Transport Infrastructure Pros Cons
Required
Road – private car
Road – bus
Rail
Air
Sea – ferries
,Freight:
Mode of Transport Infrastructure Pros Cons
Required
Road – lorries
Rail
Air
Sea – container
ships
Transport as a Derived Demand
“Derived demand occurs when the demand for a particular product depends on the
demand for another product or activity.”
Goods
Leisure Work
Transport
Drivers of demand for transport
Passengers: Price, prices of substitutes, income, quality
Freight: Price, prices of substitutes, speed and quality of services, nature of goods
to be moved
Past Paper Questions
Topic Questions
Definition of transport, Using Fig. 1, what evidence is there to suggest that Stuttgart had been more
transport modes and successful than Edinburgh or Bristol in reducing reliance on the car? (2 marks) (June
modal characteristics 2011)
for the movement of What is meant by the term ‘transport infrastructure’? (1 mark) (Jan 2013)
passengers and Explain one possible advantage to freight operators of using rail as a mode of
freight. transport. (2 marks) (Jan 2013)
Transport as a derived Explain why the demand for air transport can be said to be a ‘derived’ demand. (2
demand. marks) (June 2010)
Analyse why the demand for passenger and freight transport is a derived demand.
(15 marks) (June 2012)
, Market Concentration
Specification
Market concentration.
Definition
“’Market concentration’ is the degree to which the output of an industry is dominated
by its largest producers.”
In other words, how many of the sales in the market are accounted for by the biggest
firms in that market.
Firm Sales (£m) % Market Share
A 56
B 43
C 22
D 12
E 3
F 1
Total 100%
Calculate the 3 firm concentration ratio of this market.
3 firm concentration ratio = __________________________________________________________
This means:
A highly concentrated market is a market which is dominated by a small number
of firms (oligopoly)
We say a market becomes more highly concentrated as fewer firms dominate a
larger share of the market
Lots small firms and One large firm, no
competition – low competition – high
market concentration Mergers & acquisitions market concentration
The Impact of Increased Concentration
You need to be familiar with impact of increased market concentration on a market,
and that this can be caused by mergers and acquisitions between companies.
Benefits of increased concentration:
, Firms gain from economies of scale
The natural monopoly argument
Dynamic efficiency gains
Use of supernormal profits for efficiency gains
Use of supernormal profits to innovate
Drawbacks of increased concentration:
Lack of competition between firms
Firms may be productively and allocatively inefficient
Higher prices and reduced output
Less incentive to innovate
Evaluation of Increased Market Concentration
The impact of increased concentration may depend upon the extent to which
transport markets are regulated.
The impact may depend upon the extent to which existing dominant firms fear
entry by other firms (ie degree of contestability)
The impact may depend upon exactly how many firms there are in the market.
For example, despite a rise in concentration, if there are still a number of firms
fiercely competing against each other, then a more competitive market
structure may exist in reality.
Past Paper Questions
Topic Questions
Market Discuss the effects of increased concentration in transport markets. (20 marks)
concentration. (June 2010)
Explain the impact on market concentration of a merger between Thompson
Airways and Thomas Cook Airlines. (2 marks) (June 2012)
