Chart of the Day: Induced Travel Hypothesis



All right, here’s a doozy for you. This is a chart that I pulled out of one of David’s engineering articles. I’m not sure I understand it. Maybe you can explain it to me.

The best I can do is that this chart shows that demand for travel (e.g. the desire to drive in a car down the road or freeway) is not constant, but shifts in relation to the supply of roadway (i.e. congestion). In other words, if we build more roads, people will drive more because it’s easier. If we build fewer roads, people will drive less because its more difficult.

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10 Responses to Chart of the Day: Induced Travel Hypothesis

  1. Jeff Klein May 20, 2014 at 11:27 am #

    Essentially what’s happening here is

    (1) the supply is changed from S1 to S2, represented by the two curves. For each of these two curves (a fixed supply), the price (y axis) goes up as the quantity of travel goes up (x axis).
    (2) A single curve is shown for demand. From the demand side, the quantity of travel goes up as the price decreases.
    (3) Supply intersects demand one for each case, low supply (S1) and high supply (S2). Each of those points has corresponding values on each the price and quantity of travel axis. When the supply is increased, the price drops from P1 to P2, and the quantity of travel increases from Q1 to Q2.

    To make a long story short: induced demand.

    • Jeff Klein May 20, 2014 at 11:29 am #

      … all of which follows from the basic assumptions economists start with. If you believe people respond to price incentives, then you believe in induced demand, even without this figure.

      • Adam Miller
        Adam Miller May 20, 2014 at 11:33 am #

        To put it even more simply: if you make it cheaper to travel, people will travel more and increasing the available supply of travel makes it cheaper.

        • Jeff Klein May 20, 2014 at 11:50 am #

          As a qualitative statement, I don’t see any way it’s anything but a fact. I wonder how much effort has been made to quantify it.

  2. Matt Steele
    Matt Steele May 20, 2014 at 11:34 am #

    This makes me miss my economics classes…

  3. Bill Lindeke
    Bill Lindeke May 20, 2014 at 11:54 am #

    How do we know the shape of the S curve? It seems to me that a lot depends on the angle of that bend, i.e. the ratio of delta-S to delta-Q…

    • Jeff Klein May 20, 2014 at 11:59 am #

      Yeah that’s what I was saying, this is just a schematic to make a qualitative point. The question is how much research has gone into figuring out those elasticities (the slopes of the curves).

  4. Matt Miller May 20, 2014 at 1:32 pm #

    Doesn’t help that it’s a lousy chart. But many Economics charts are. Ideally, they would have used color. Forced to use B&W, should have used different dashes for the lines, and shadings for the area between them. At the least, they could have used different line weights.

    • Bill Lindeke
      Bill Lindeke May 20, 2014 at 1:52 pm #

      If you think this chart is lousy, you just wait…

    • Adam Miller
      Adam Miller May 20, 2014 at 3:01 pm #

      What’s all this fancy talk? Back in my day of economics classes…

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