SENSITIVITY OF TRAVEL DEMAND

SENSITIVITY OF TRAVEL DEMAND

INTRODUCTION

Travel has grown considerably over the last few decades and this increase seems
set to continue. This is as a result of a wide range of factors which give rise to the
demand for travel. Of course this travel can only take place if there are appropriate
facilities – roads, buses, trains, cycles etc. The presence of these, their cost and
the quality of service they offer also affects how much travel takes place, where,
when and by what means. The relationship between demand and supply of
services and facilities is complex and a detailed analysis is beyond the scope of
this paper, which concentrates on factors affecting demand and changes in
accessibility and prices.

High value of trips will occur even if user cost are high. some trips have
relatively low value and will only occur if prices are low.

CIVIL ENGG.JNNCE SHIMOGGA 1

 SENSITIVITY OF TRAVEL DEMAND

DEFINITION:

The variation of economic pricing in travel mode varies the regional demand of
travel.

Sensitivity of travel demand varies with the demand management which includes
responses of different demand management strategies of travel such as

 Parking restriction and congestion pricing

 Land use policies including mixes development centres or corridors and
pedestrian friendly design.
 Information communication technology of travel demand also varies with
elasticity pricing.

Sensitivity of Travel Demand In the planning and evaluation of transportation

systems and associated investments, it is often useful to have knowledge of the
changes in transportation demand caused by changes in attributes of the
transportation system or its environment. A particular instance is the change in
demand for a given mode in response to changes in price of that mode. Given the
functional form of the travel demand function, it is possible to derive a marginal
effects model that estimates any one of the following:

• Change in demand in response to unit change in attribute .

• Change in demand in response to unit percent change in attribute .

• Percent change in demand in response to unit percent change in attribute.

CIVIL ENGG.JNNCE SHIMOGGA 2

 SENSITIVITY OF TRAVEL DEMAND

THE THEOREM OF SENSITIVITY OF TRAVEL DEMAND

A linear demand function for travel in shown in figure 2 for given pair of origin
and destination points, at a specific time of day and for a particular purpose. Such
a demand function is useful for predicting travel over wide range of conditions.
Aggregate demand curve , representing the volume of trips demanded at different
prices by a group of travellers.

q=α-βp………………1

q= quantity of trips

p=price

α &β= demand parameters

travel demand can be used for forecast changes in the volume of travel caused by
specified changes in price in the short run. A useful descripter for explaining the
degree of sensitivity to change in price is elasticity of demand (ep)

ep=% change in quantity of trips demanded that accompanies as 1% change in

price.

𝛿𝑞/𝑞 𝛿𝑞
ep = 𝛿𝑝 = 𝑋𝑝/𝑞………………..2
𝛿𝑝
𝑝

where 𝛿𝑞 is the change in no. of trips that accompanies 𝛿𝑝,the change in price

Arc price elasticity

𝛿𝑞
= ∗ 𝑝/𝑞= Q1-Q0/(P1-P2)*(P1+P2)/2/( Q1-Q0)/2……………..3
𝛿𝑝

Q1&Q0 represent the quantity of travel demanded corresponding to prices to P0

and P1

CIVIL ENGG.JNNCE SHIMOGGA 3

 SENSITIVITY OF TRAVEL DEMAND

For linear demand function we can determine the elasticity with respect to price
by deriving equation:

𝛿𝑞 −𝛽𝑝
ep= 𝑋𝑝/𝑞=
𝛿𝑝 𝑞

after substituting for p ,using equation………… 1

𝛼
ep=1-
𝛽

DESCRIPTION: Demand sensitivity is referred to the change in demand for a

product when its price is changed by a small amount. Demand sensitivity is

also known as price elasticity of demand and should not be confused with price
elasticity of supply. It shows the responsiveness of the demand for a product to
a change in its price. Factors which impact demand sensitivity include –
availability of substitutes, its necessity, distribution channels, permanent or
temporary price change, etc.

Price Elasticity of demand = %change in quantity demanded/% change in price

of a particular product
To understand the implication of this formula, we have to study the impact of a
small change in price and its resultant impact on the quantity demanded. If a
small change in the price of the product is accompanied by a large change in
quantity, then the product is said to be elastic or we could also say that the
product is responsive to price change.
We say that a product is inelastic when even a large change in price does not
result in huge demand for the product. We can measure demand elasticity of
demand on a scale of 0 to 1 and greater than 1.
If the price elasticity of demand is equal to zero then the demand is perfectly
inelastic. If it is in between 0 and 1, demand is known as inelastic. If the price
elasticity of demand is equal to 1, it is known as unit elastic, and finally if it is

CIVIL ENGG.JNNCE SHIMOGGA 4

 SENSITIVITY OF TRAVEL DEMAND

greater than one, the price elasticity of demand is known as perfectly elastic.
Let’s understand this with the help of an example:

If the quantity demanded for a good increases by 20% in response to 15%

decrease in price, the price elasticity of demand would be 20%/15% = 1.3. Here
the value is greater than 1 which signifies that the demand is perfectly elastic.

PROBLEMS: An aggregate demand function is represented by the equation q=200-10p

where q is the number of trips made , and p is the price per trip. Find the price elasticity of
demand when q=0 , q=50, q=100, q=150, q=200 trips

Corresponding to

p=20, p=15, p=10, p=5, p=0cents

solution:

𝛼
ep=1- α=200
𝛽

200
e0=1- =-0
200

200
e5=1- =-0.133
150

200
e10=1- =-1
100

200
e15=1- =-3
50

200
e020=1- =-∞
0

CIVIL ENGG.JNNCE SHIMOGGA 5

 SENSITIVITY OF TRAVEL DEMAND

CIVIL ENGG.JNNCE SHIMOGGA 6