Editing Induced demand (section)

=== Price of road travel ===
A journey on a road can be considered as having an associated cost or ''price'' (the [[generalised cost]], ''g'') which includes the [[Out-of-pocket expenses|out-of-pocket cost]] (e.g. fuel costs and [[road pricing|tolls]])<ref name="Didi">{{cite book |last1=Rodrigue |first1=Jean-Paul |title=The Geography of Transport Systems |date=2020 |publisher=New York: Routledge |url=https://transportgeography.org/contents/chapter3/provision-and-demand-of-transportation/elasticity-road-transport/}}</ref> and the [[opportunity cost]] of the time spent travelling, which is usually calculated as the product of travel time and the [[value of time|value of travellers' time]]. These cost determinants change often, and all have variable effects on demand for transport, which tends to be dependent on the reason(s) as well as method of travel.<ref name="Didi"/>

[[File:San Francisco-Embarcadero Freeway demolition.jpg|thumb|left|Part of the [[Embarcadero Freeway]] in San Francisco being torn down in 1991. The removal of the freeway illustrates the inverse of induced demand, "reduced demand".]]

When road capacity is increased, initially there is more road space per vehicle travelling than there was before, so congestion is reduced, and therefore the time spent travelling is reduced – reducing the generalised cost of every journey (by affecting the second "cost" mentioned in the previous paragraph). In fact, this is one of the key justifications for construction of new road capacity (the reduction in journey times).

A change in the cost (or price) of travel results in a change in the quantity consumed. Factors such as petrol prices, as well as fuel costs, are the most common variables that influence the quantity demanded for transport.<ref name="Didi"/> This can be explained using the simple [[supply and demand]] theory, illustrated in this figure.

==== Elasticity of transport demand ====

The economic concept of elasticity measures the change in quantity demanded relative to a change in another variable, most commonly price.<ref>{{cite news |last1=Hayes |first1=Adam |title=Elasticity |url=https://www.investopedia.com/terms/e/elasticity.asp |publisher=Investopedia |date=August 1, 2021}}</ref> For roads or highways, the supply relates to capacity and the quantity consumed refers to [[vehicle miles of travel|vehicle miles traveled]]. The size of the increase in quantity consumed depends on the [[elasticity of demand]].

The elasticity of demand for transport differs significantly depending on the reason people are choosing to travel initially. The clearest example of inelastic demand in this area is commuting, as studies indicate that most people are going to commute to work, regardless of fluctuations in variables such as petrol prices, as it is a required activity to generate income.<ref name="Didi"/> This exemplifies the fact that activities that yield a high economic benefit, in this case, financial gain in the form of income, tend to be inelastic. In contrast, travel for recreational or social reasons has a low tolerance for price increases, and as such the demand for recreational travel when prices spike sees a sharp decline.<ref name="Didi"/>

A review of transport research suggests that the elasticity of traffic demand with respect to travel time is around &minus;0.5 in the short term and &minus;1.0 in the long term.<ref>{{cite journal |journal=Transportation |year = 1996|volume=23 |pages=35–54|title=Empirical evidence on induced traffic: A review and synthesis|author=Goodwin, P. B.|doi=10.1007/BF00166218|s2cid = 154827067}}</ref>  This indicates that a 1.0% saving in travel time will generate an additional 0.5% increase in traffic within the first year. In the longer term, a 1.0% saving in travel time will result in a 1.0% increase in traffic volume.