This document aims to provide the knowledge of how the market interacts with the logistical operations and how they all aim to promote customer satisfaction.
550/23/M05: Evaluation of Market Interaction
Mutare Polytechnic Institute
Study Guide, definitions and notes
2.1 Market demand for Transport
1. Law of Demand
The law of demand states that as the price of a particular good or service
increases, the quantity demanded decreases. In other words, this is an
inverse relationship between price and quantity. Such inverse relationships
between price and quantity are some of the basics in principles related to
economics. It simply means that most consumers normally tend to demand
higher amounts of a good or service at lower prices and vice versa.
2. Derived Demand of Transport Services
Demand for transport services is often derived from demand for other
commodities and services. Therefore, the demand for transport is a derived
one, not an end itself but the means to another end. For instance, the
demand for transport arises mainly due to demand for tourism.
3. Factors Determining the Demand for Transport
The demand for transportation is affected by the various variables below:
The demand for transportation services increases with income,
especially in the context of optional travel and modes of transport.
Growth in demographics: This meant that an increase in population
translates to a higher demand for transportation as people move to
perform several activities.
Prices of Complementary and Substitute Goods: The demand for
transport may also be affected by the prices of complementary goods
—for instance, gasoline—and substitute goods, such as public
transport. Often enough, when the price for gas goes up, people begin
to drive their cars less.
, Of course, consumer preferences for one mode of transport over
another could also make a huge impact on the demand. Some people
just like traveling by car, while others use public means or fly.
Anticipations of future prices and incomes along with general economic
conditions can greatly impact demand. For example, if people are
expecting fuel prices to rise in the near future, they will be more eager
to buy fuel-efficient cars or purchase public transport services.
4. Market Demand for the Transportation of Goods and People
The total demand for transportation services is the summation of the
quantity demanded by all the consumers at any given price level. It is
obtained by the horizontal aggregation of the individual members' demand
curves. The market demand curve has a downward slope reflecting the law
of demand.
5. Peak Demand
Demand peaks refer to the period of time when transportation services are in
demand; this usually is during peak hours or on festive days. The same
phenomenon of peak demand could result in congestion, increased prices,
and deterioration of service quality.
2.2 Theory of Utility
6. Definition of Utility
Utility is a measurable characteristic of satisfaction or happiness derived by
the consuming agent from a product or service. Basically, this is subjective
and would vary among people. Though it is not quantifiable or measurable
objectively, utility is the effective way to explain consumer behavior.
7. Marginal Utility and Total Utility
Total utility: The total satisfaction a consumer gets from using or
consuming a certain quantity of a good or service.
Marginal utility: is the additional level of satisfaction resulting from the
consumption of a single additional unit of any good or service.
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