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A comparison between bus and tram will show how the cost structure is derived.


Costs of Supply

The cost of setting-up a bus fleet is very low compared with a tram, but the running costs are higher. (see Fig 1a ) As passenger loadings increase, a bus service will find it needs progressively greater investment in vehicles; running costs will also increase proportionally. The gains due to 'economies of scale' are slight.

A tramway is an expensive piece of infrastructure to install and equip, the whole track structure must be in place before service can commence and any particular design of tramcar will be cheapest if purchased in quantity. Once the system is in place, running costs are relatively low and less affected by the level of use.

This is shown by the same graph (Fig 1b ) drawn so as to reflect cost per journey relative to the number of journeys made.

Above some particular level of passenger loading, the tram becomes cheaper than the bus to operate.Ticket prices can be reduced in order to achieve this level and the resultant increase in loading will have little effect on the running costs of a tram.



Transport Demand

Transport in cities can be made by a number of modes: train, bus, tram, taxi, car, bicycle, on foot and occasionally by other ways.
Not all of these modes are available in every city and some, such as car, may be available to some individuals but not others. This gives rise to a demand curve (Fig 2 ) which is a combination of other differing curves.

Car owners have the flexibility to choose whether or not to use public transport, so have able-bodied people who live within walking distance of their destinations or who can use bicycles. Their use of public transport will be determined, among other things, by the relative cost of the journey compared with the alternatives. (It will also depend on other factors such as reliability and availability but these are not under consideration here)

People who do not have a car or who have impaired mobility are a 'captive audience' for the bus (or taxi). If a journey is imperative, they have little choice over the mode. Similarly, if the journey is a long one or the weather is inclement, walking or cycling may not be an attractive alternative, even for someone who is able-bodied.

The resulting mixture of degrees of flexible and inflexible demands, which is found in practice, gives a combined demand similar to the one shown in Fig 2.


Supply and Demand Curves

By superimposing the public demand curve on the bus and tram supply curves (Fig 3 ), an understanding of the pricing differences of buses and trams becomes possible.
The bus finds an economical operating point (Point 'a') at a relatively high fare and fewer passenger journeys, whereas the tram is most economical (Point 'b') when carrying large numbers of passenger journeys at a cheap fare.

This means that the bus carries mainly passengers from the 'inflexible' demand group, whereas the tram will capture passengers with a more flexible demand - for instance car owners.


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