A comparison between bus and tram will show how the cost structure is derived.
BUS
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.
TRAM
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 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.
FLEXIBLE DEMAND
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)
INFLEXIBLE DEMAND
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.
OVERALL PUBLIC DEMAND
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.
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.