ECO 322
Is there Elasticity in Public Transport? Investigating the Impact of Population Elasticity on
Transportation Demand
Elasticity is a business and economics concept that refers to the degree to which
customers or producers alter their demand or supply in response to changes in price or revenue.
Concerning the transport industry, the elasticity of transport demand implies how travelers are
sensitive to price changes. As a general rule, an increase in the price of any good or service is
associated with a corresponding reduction in the quantity demanded. However, at times, the
transport sector can be inelastic. For example, a change in the transit fares does not affect
consumer behavior, and they continue to demand the same amount of service.
The elasticity values are crucial for predicting how a change in transit fares and other
transportation dynamics will impact demand. In many communities, transit-dependent people are
relatively low, especially in developed countries. Conversely, those who use public transit are
very price sensitive. Nonetheless, a study by Litman (2004) on "transit price elasticities and
cross-elasticities" shows that public transport is both elastic (long-run effect) and inelastic (short-
term effect).
The purpose of this study is to investigate whether or not public transport is elastic with
the primary emphasis on how the population characteristics cause transport elasticity or
inelasticity. The primary hypotheses that will guide this still include the following.
, IS PUBLIC TRANSIT ELASTIC 2
i. Demographic variabilities such as density, age and employment determine the future
transportation demand.
ii. Other factors are responsible for transportation elasticity thus demographic factors
play insignificant role in demand elasticity.
Research Gap
Several piece of literature have focused on determining whether or not transportation is
elastic or inelastic. However, these studies recorded mixed evidence on the changes in
transportation elasticity over time. Also, most of these studies are either general or focused on
price elasticity, and none has explicitly investigated the impact of population variabilities on
public transport demand. Furthermore, the previous studies are considerably old, and the fact that
changes occur in public transport over time, newer data is necessary to predict future demand.
These are the gaps that the current study will fill.
State of Research
The research conducted on whether public transport demand is elastic has shown
that there is price elasticity in the transportation sector. The study, however, does not
conclusively establish the price elasticity of demand for public transportation in various
urbanized areas. Transportation services are often considered to have low-price elasticity.
According to various scientific analyses of previous literature on public transportation demand,
the price elasticity of demand for public transportation in metropolitans is estimated to range
between 0.009 and 1.32, with an average value of around 0.38. (Holmgren, 2007). However,
these figures could differ slightly.
Is there Elasticity in Public Transport? Investigating the Impact of Population Elasticity on
Transportation Demand
Elasticity is a business and economics concept that refers to the degree to which
customers or producers alter their demand or supply in response to changes in price or revenue.
Concerning the transport industry, the elasticity of transport demand implies how travelers are
sensitive to price changes. As a general rule, an increase in the price of any good or service is
associated with a corresponding reduction in the quantity demanded. However, at times, the
transport sector can be inelastic. For example, a change in the transit fares does not affect
consumer behavior, and they continue to demand the same amount of service.
The elasticity values are crucial for predicting how a change in transit fares and other
transportation dynamics will impact demand. In many communities, transit-dependent people are
relatively low, especially in developed countries. Conversely, those who use public transit are
very price sensitive. Nonetheless, a study by Litman (2004) on "transit price elasticities and
cross-elasticities" shows that public transport is both elastic (long-run effect) and inelastic (short-
term effect).
The purpose of this study is to investigate whether or not public transport is elastic with
the primary emphasis on how the population characteristics cause transport elasticity or
inelasticity. The primary hypotheses that will guide this still include the following.
, IS PUBLIC TRANSIT ELASTIC 2
i. Demographic variabilities such as density, age and employment determine the future
transportation demand.
ii. Other factors are responsible for transportation elasticity thus demographic factors
play insignificant role in demand elasticity.
Research Gap
Several piece of literature have focused on determining whether or not transportation is
elastic or inelastic. However, these studies recorded mixed evidence on the changes in
transportation elasticity over time. Also, most of these studies are either general or focused on
price elasticity, and none has explicitly investigated the impact of population variabilities on
public transport demand. Furthermore, the previous studies are considerably old, and the fact that
changes occur in public transport over time, newer data is necessary to predict future demand.
These are the gaps that the current study will fill.
State of Research
The research conducted on whether public transport demand is elastic has shown
that there is price elasticity in the transportation sector. The study, however, does not
conclusively establish the price elasticity of demand for public transportation in various
urbanized areas. Transportation services are often considered to have low-price elasticity.
According to various scientific analyses of previous literature on public transportation demand,
the price elasticity of demand for public transportation in metropolitans is estimated to range
between 0.009 and 1.32, with an average value of around 0.38. (Holmgren, 2007). However,
these figures could differ slightly.
