Some Underlying Economic Theory of Urban Freight Transport

Abstract

Most textbooks of economic theory start by attempting to define what economics is about. Although it is unlikely that any very brief statement will do full justice to the subject, it is, nevertheless, a useful way to begin a discussion of economics, and in our case, a discussion of how some of the basic ideas developed in economic theory can throw some light on the very complex characteristics of urban freight transport. Economics is essentially concerned with how individuals and groups of individuals make choices about how they allocate scarce resources to different forms of production, and also about how they distribute what is produced for consumption between different groups and between now and the future. Central to the act of production is the idea that certain groups are prepared to supply commodities for others. Central to the act of consumption is the concept of demand. A great deal of insight can be gained merely by formalising the interaction between supply and demand for a given commodity and analysing the behaviour of the resulting market. This is undertaken in Section 2.2. Then, in Section 2.3, we examine consumer behaviour in order to gain a deeper understanding of demand and in the following section we examine in more detail the concept of cost, since this is a major influence on supply. Section 2.5 investigates how firms will behave when they are operating in different types of market; and, finally, Section 2.6 looks at the theory of second-best, which is just one part of the question of how society may want to adjust the outcome of the basic working of the economy in order to improve the general level of social welfare. Further treatment of welfare economics is given in Section 6.1.