ABSTRACT
Whilst elasticity of demand impacts upon the demand side of the market, a major factor affecting the quantity supplied is the cost of production. Transport costs however fall into a variety of different classes. There are those costs that impact on the individual user of a particular mode of transport who directly benefits from undertaking a journey. These are known as private costs and would include both the financial costs involved, such as the fare in the case of public transport, as well as non financial costs, such as the time involved in undertaking the journey. Taken together these are known as the ‘generalised cost’. There are then the costs of transport that fall on non users of the transport service who do not benefit from that transport service. This includes what could almost be termed the unwanted by-products from the undertaking of transport activities, such as polluted air, the congested road, noise and visual intrusions. These are generally referred to as public costs, and as these are a significant factor in the provision of transport services these will be examined in some depth in various chapters later in the text. Finally there are production costs that fall on the operators of a transport service or in the case of private transport the financial costs incurred when undertaking the activity. In many ways these are essentially private costs, as the individual that incurs the cost (the operator/road user) is the one that benefits from the provision of that service (i.e. profit/benefit from the journey). This chapter is specifically concerned with costs that fall into this last group, particularly in the production of public transport services. Road user issues are examined later in Chapter 8 under pricing.
