Analyse How and Why Economists Forecast Growth in Transport Demand. (15 Marks)

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Analyse how and why economists forecast growth in transport demand. (15 marks)

Forecast is a future estimate usually based on past information. It is important to make predictions about the demand for transport since transport plays very important role in economic growth. It can be assessed in terms of usefulness of transport in providing services for people and connecting different steps in the supply chain. Economists make forecasts of demand for transport in order to predict how much the provision of transport services is needed and this is sometimes called ‘predict and provide’ approach. Another reason of making forecasts is to know in which parts of roads there will be the highest amount of cars and the biggest congestions might occur. This will help government in taking measures to reduce these congestions before they occur. In the UK, for example, it was forecasted that by the year 2010 road congestion will increase by 65%, while motorway congestion by 268%. By introducing 25 years plan ‘The Future of Transport’ government is considering to increase the capacity of roads and by reduce congestion. Also forecast of transport demand can show the effectiveness of introduction of transport policies at both national and local levels. In order to make these forecasts economists have to gather and analyse past statistics of demand and also make other assumptions of population growth, GDP growth, fuel prices and the amount of license holders. For freight transport industrial output and import of goods have also to be assumed. However, as forecasts are based on past info, they might not reflect the real picture of situation and lead to market and government failure.
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