Tlmt 601

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Arc Elasticity of Bus Traffic

In the City of Joplin, due to weather devastation and hurricane effects, the cost of parking in the local Square has increased by 20%. This change has not only reduced the number of vehicles that travel to the Square by 5%, but it has also forced the inhabitants of Joplin to use buses. Bus trips have therefore increased to 20%. With respect to the cost of parking in the local Square, determine the elasticity of bus transit.

Answer:

initial parking price = p1

final parking price =p2=1.20p1

initial transit demand = Vt1

final transit demand=Vt2=1.20Vt1

initial auto demand =Va1

final auto demand=Va2=.95Va1

eTP=(Vt2-Vt1)(p1+p2)/2/(p2-p1)(Vt1+Vt2)/2

=(1.20Vti-Vti)(p1+1.2p1)/2/{(1.20p1-p1)(Vt1+1.20Vt1)/2}

=1

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Average Cost

In your own words, describe the meaning of average cost. You normally buy a crate of wine for $75. One crate has 6 bottles of wine. After a month, the store clerk informs you that the same crate of wine now costs $82. However, there are 7 bottles in a crate. To the nearest cent, determine the average cost of the crate from last month to now. (20 points)

Average Costs: The average total cost, ATC, is the total cost associated with 1 unit of output. It is calculated as the ratio of the total cost to the output: ATC = TC /V , where TC is the total cost and V is the volume (output). The average fixed cost, AFC, is the fixed cost associated with 1 unit of output and is calculated as the ratio of the fixed cost to the output, AFC = FC /V . Similarly, the average variable cost is the cost of 1 unit of output and is calculated as the ratio of the variable cost to the output, AVC = VC /V . The concept of average costs is useful in the economic evaluation of transportation system improvements because it helps assess the cost impacts of improvements at a given supply level.

Answer:

75/6=$12.50 per bottle 82/7=$11.71 per bottle 12.50-11.71= .79 difference in bottle cost

75-82=-7, or a case has increased in cost by $7.00

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Marginal Cost

In your own words, describe the meaning of marginal cost. You normally buy a crate of wine for $75. One crate has 6 bottles of wine. After a month, the store clerk informs you that the same crate of wine now costs $82. However, there are 7 bottles in a crate. To the nearest cent, determine the marginal cost for one additional bottle of wine now. (20 points)

Marginal Cost: The marginal cost of a transportation good or service is the incremental cost of producing an additional unit of output. The terms of incremental cost, differential cost, and marginal cost have essentially similar meaning but typically are used in contexts that have very subtle differences. Incremental cost is a small increase in cost. Differential cost is the ratio of a small increment of cost to a small increase in production output. Marginal cost analysis is relevant in transportation system evaluation because an agency may seek the incremental cost changes in response to planned or hypothetical production of an additional unit of output with respect to facility construction, preservation, or operations. Marginal cost and average cost can differ significantly. For example, suppose that an agency spends $10 million to build a 10-mile highway and $10.5 million to build a similar 11-mile highway, the average costs are $1 million and $0.954 million, respectively, but the marginal cost of the additional mile is $0.5 million. The expressions related to marginal cost are as follows: Marginal variable cost: MVC = ∂ VC ∂V Marginal total cost: MTC = ∂ TC ∂V = ∂ FC ∂V + ∂ VC ∂V = ∂ VC ∂V = MVC Like average cost, marginal cost concepts help an agency or shipper to evaluate the cost impacts of various levels of output or the additional cost impact of moving from a certain output level to another.

Answer:

12.50-11.71= .79 difference in bottle cost

75-82=-7 or a case has increased in cost by $7.00

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Unit Travel

In your own words, describe the meaning of unit travel. When traveling on a Greyhound bus, without intervention or obstruction, it is important to determine the unit travel time. If you leave Cleveland in a bus full of 24 passengers and arrive Cincinnati in 3 hours, what will be the average unit travel time in person minutes? (20 points)

Unit travel: Unit in-vehicle travel time per traveler, U 1 = OCC × TT V where TT V is the average vehicular operating travel time and OCC is the average vehicle occupancy. In cases where the travel speeds of trucks and other commercial vehicles are significantly different from passenger vehicles, separate travel time estimates should be made for each vehicle class.

Answer:

Assuming that 24 passengers include me, the average unit travel time will be 24 x 180 = 4320 without interruption. 3 hours = 180 minutes multiplied by 24 passengers.

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Vehicle Operating Cost

Vehicle costs are direct expenses that include the fixed and variable costs of ownership. These variable costs are typically referred to as the Vehicle Operating Costs, or VOC. These costs vary based on use and are normally expressed in cents per mile. VOC savings are based on transportation improvements that result in reduced VOCs compared to an established baseline cost.

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Hepburn’s VOC Speed Model

Example: In Hepburn’s Speed Model, the coefficients of vehicles are indicated for C and D. As the chief of operations in your organization, you are responsible for presenting the yearly budget for the semi trucks in your company’s inventory. Since your safety officer is insisting that each of your drivers must maintain an average speed of 55mph, what would be the vehicle operating cost of your company for each semi-truck in cent per mile?

Answer:

VOC = a0 – a1S + a2S2

VOC = 38.1 - (0.093 X 55) + (0.00033 X 552)

VOC = 38.1 – (5.115) + (0.99825)

VOC = 33.9833