Economics for Transport Manager Essay Example | Topics and Well Written Essays - 3500 words

Economics for Transport Manager - Essay Example Besides the use of the sector in production purposes, it has great importance amongst the consumer class of the society. Transportation cost holds a significant amount in consumer’s budget. Moreover transportation costs determine the price of products with increase in the former, contributing to simultaneous increase in the later. Thus the main aim of this paper is to discuss the different aspects of transport economics along with identifying the importance of the sector in every economic transaction. Pricing in the transport sector of the economy depends on different and continuously changing factors. The factors that have been identified are the type of the transport, the different types of industry and the countries and towns in which the transport sector is functioning. Moreover the pricing mechanism of the private transport industry differs from that of public transport. Thus there arises the need of discussing the two different price mechanisms of average cost pricing an d marginal cost pricing for the transport industry. (Jansson & Martinsson, 2003, p6) Difference between average cost pricing of a monopolist and marginal cost pricing Average cost pricing is referred as the procedure of charging price by a monopoly. If P is the price of the monopolist and AC is the average cost then the approach of average cost pricing of monopolist is accomplished where P = AC. In case of average cost pricing the firm enjoys zero profit. In transportation, setting price equal to average costs means the provider will offer the service when the value of providing the service is at least equal to the average cost of the same. (Haworth, n.d) P A AC P=AC MC D O MR Q (Haworth n.d) In this diagram... It is clear, that transport is a significant sector of the economy. The paper therefore discusses the economics of the transport sector applicable to business perspectives. Firstly, the paper focuses on mechanisms of setting standard price as are used in this sector. Identifying the price mechanisms and the importance of a proper market structure to the management are the subsequent topics of discussion. Competition has been identified as essential for efficient functioning of a market. Truly being applicable for the transport sector of the economy, the next topic of discussion of the paper is the importance of competitive laws and the effect of improperly designed competitive laws on economic functioning with its applicability to the transport sector. Transportation holds a significant position in the consumer basket and increase in its cost affects the consumer price index. Moreover transportation acts as a tool in maintaining stability of the economy through proper distribution of goods and services. Improper functioning of the sector may lead to the increase in price of products through the increase in transportation costs. Thus the importance of transportation in the economy as well as in the life of common people is the main focus of this paper. To conclude it can be said that transportation is a sector that has huge importance in every aspects of economy. The costs of transport which is in turn dependant on fuel have a cascading impact on all other products and services.