LOD 106003

TRANSPORT ECONOMICS
SLIDES TOPIC 2
Prepared by:
Mdm Hjh Ismila Bt Hj Che Ishak

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 2.0 TRANSPORT AND ECONOMIC
GROWTH

2.1 Examples of transports

2.2 Relationship of transportation and

economic growth of countries as a whole

Outcome: CLO 1
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Can everyone of you name 10
examples of transports that
are available in this world?

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2.1 Examples
of Transports

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2.1 Examples
of Transports

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Transportation
Industry

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Transportation
Infrastructure

• The construction, maintenance,

and operation of transportation
infrastructure such as roads,
bridge, ports, canals, airports,
seaports and, railways

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Public Transport

• Passengers services that can

be used for moving around a
city and commuting such as
trains, buses and ferries.
• For example: Japanese train
companies handle around 15
million passengers trip a year
that are mostly daily
commuters in 2020.
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Airlines

• Airlines carry more than 4.5

billion passengers a year
(2020).
• It is a common for express
freight to be shipped by
aircraft.

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Railways

• Railways that offer passengers and

freight services.
• These often resemble monopolies that
may be regulated as critical public
infrastructure.

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 Maritime Shipping

• Maritime freight services

such as bulk carriers,
container ships, tankers,
refrigerated ships, general
cargo ships and special cargo
ships carry the bulk of world
trade.

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Cruise Industry

• Cruisers offer a tour-like

experience on large ship
that may offer
entertainment and leisure
activities.
• A single cruise ship can
burn 150 tonnes of fuel a
day and emit as much air
pollution as a million cars.
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Trucking Industries

• Another backbone for the

shipping of goods than tents
to be an important employer
due to its smaller scales.
• For example: trucking employs
around 2 millions people in
United States.

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Logistics
• Logistics is the industry that
delivers goods end-to-end
including the last miles.
• For example: a delivery service
that delivers ecommerce
orders to customers.
• This includes complexities
such as warehousing and
customs.
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Taxi and Drivers
Taxi and similar
services that
convey passengers
to location of
choice.

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• Travel services that includes an

Tours element of transport such as a
bus tour.
Vehicle Rentals
Rental of vehicle including small vehicles
such as bicycles.
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Insurance
• The market for vehicles,
freight and travel insurance.

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 19

• The construction of ships for

Ship Buildings transport.
• Considered a heavy industry.
Vehicles

• The design, manufacturing,

marketing and sales of
vehicles such as electric cars
and buses.

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 • The manufacturing and sales of
commercial aircrafts is considered part of
Aerospace the aerospace industry but is dependent
on the transportation industry for it sales.
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 Space

• The space industry is

historically viewed as part of
the aerospace, technology
or manufacturing industries
that produce products such
as rockets and satellites,
• As the space industry
evolves it may begin to
resemble an element of
transportation industry as it
begins to carry more
passengers or freight.

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 Homework:

How transportation
effects economic growth?

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2.2 Relationship of Transportation and
Economic Growth of Countries as a Whole
▪ One of the key measures of macroeconomics is economic
growth, and logistics and transport play a key part in this.

▪ To encourage economic growth, governments need to invest in

logistics infrastructure such as roads, railways, airports and
ports.

▪ In a mixed economy, one of the ways of measuring the success

of government’s influence on the economy is by comparing how
it has affected logistics and transport growth.
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2.2 Relationship of Transportation and
Economic Growth of Countries as a Whole
▪ Everyone wants an efficient transport system as it allows easier
movement of labour from households to firms, goods and
services between firms, and from firms to households.

▪ Additionally, it allows labour to easily move between firms, and

products and services from firms to households.

▪ An efficient economic transportation demonstrates a low

unemployment rate.

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 Transport and competition
2.2 Relationship of
Transportation and Decoupling transport from GDP
Economic Growth of
Countries as a Supply- led?
Whole Demand-led?

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 • Transport services and the associated infrastructure can
also give a state a comparative advantage over other
nations’ economies.
• An example of a comparative advantage in transport can
be found in the US and UK rail freight industry.
Transport • In the UK, it have low bridges and cannot stack containers
at all on a train.
and • US trains can be stacked two containers high because
competition they have no height restrictions or low bridges.
• Therefore, they have a comparative advantage over other
countries who have low bridges.
• The US has an absolute advantage over countries that
have no railways, such as most of Africa and South
America.

• How about Malaysia? Discuss 27

 It is unrealistic to expect both GDP and
transport activity to keep increasing
Decoupling forever.

transport It has the effect of Marginal Utility (MU),

where an additional unit of growth has
from GDP sometime created no effect on GDP.

There are also many non-economic

factors, such as pollution and traffic jams,
which will decouple transport activity
from growth of GDP.

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 • The use of land can have negative effects on the
environment.

Decoupling • As no one expects all land to be used for roads

and other logistics infrastructure.
transport
from GDP • Finally, more efficient transport costs less, so
GDP should rise faster than transport because of
rising productivity and economies of scale.

• Thus, this has demonstrating that decoupling of

transport from GDP has occurred.

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 • Supply-led is when growth is initiated by your actions.
• More transport and logistics assets and infrastructure investment
by both government and firms will create more capacity to
Supply-led generate products or services, which will create more demand.
• More transport, logistics and the related infrastructure leads to
economic development.
• Increasing quality transport facilities leads to access to more
markets.
• As an efficient transport is cheaper, so more transport is used.
• Large-scale transport infrastructure projects will indirectly affect
the local economy.
• The multiplier effect kicks in and encourages logistics businesses
to grow.

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 • Demand-led growth is not so controllable.
• Investment in overall economic development leads to demand
for transport, so the demand is from consumers.
• Demand must initially exist to make it worthwhile to provide
Demand-led transport services
• Whereas supply-led growth is about expanding transport and
logistics capacity.
• Demand can arise from two sources: revealed and latent
demand.
• Revealed demand is based on actual movements of goods, ie
people wanting to move more things.
• Latent demand is the potential demand that can’t be satisfied
due to inadequate transport infrastructure.
• An example of latent demand is if a retail park is built outside of
a town; the demand is not there until the project is built.

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 What are the other
Relationship of Transportation
and Economic Growth of
Your task Countries as a Whole?
(Homework)
Summarise the justifications
that you’ve used and share in
the next class.

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References:
• https://www.amazon.in/Vehicles-1-Dreamland-Publications/dp/8184510535
• https://englishvocabs.com/transportation/100-transport-names-list-in-english/
• John Spacey (2020). 16 Examples of the Transportation Industry –
Simplicable. https://simplicable.com/en/transportation-industry
• The role of transport in economic development.
https://www.futurelearn.com/info/courses/what-is-economics-in-the-world-of-
global-logistics/0/steps/95653
• Department for Transport (2019, July 19). Domestic activity of GB-registered
HGVs 2018. Office for National
Statistics. https://assets.publishing.service.gov.uk/government/uploads/system/u
ploads/attachment_data/file/815839/domestic-road-freight-statistics-2018.pdf

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• THANK YOU

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