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supply and demand

Elasticity measures the response of one economic variable (e.g. the quantity demanded) to a change in another economic variable (e.g. price) (Smyth,Pearce, 2008). Transport demand refers to the amount and type of travel that people would choose under specific conditions (Litman, 2013).
For carriage of goods by sea, there is no close substitute and the demand for shipping inelastic because shipping is the most cost effective mode of transport per TEU or per ton or per cubic meter of cargo carried. As an example seaborne transport is just about 10-15% of the costs for road transport. Otherwise ships come in various sizes so there are no space constraints. The bigger the ship, the lower the freight cost and vice versa. This is a very important criteria when it comes to shipping of raw materials which are usually shipped in large amounts (UK essays, 2013).
Short run demand elasticity tends to be lower than long run elasticity because more opportunities to increase or reduce consumption can be developed over the long run than in short run. If the price of fuel goes up, for example, highway travelers can reduce fuel consumption by taking fewer trips or carpooling to share expenses and by taking a larger share of trips on transit. In the long run, users also can switch to more fuel-efficient vehicles (Lee, 1999).
Maritime transport naturally represents service industry which should be able to provide quality service to passengers and goods. Therefore, the quality, efficiency and safety are the most important factors in terms of maritime transport since the ships in shipping trade are exposed to maritime accidents risks caused by human factor, technical failures, cargo damage etc. This means that a high-quality shipping service other than reliability and maximum speed of the realization should provide a certain degree of prevention and protection from maritime accidents risks. (Samija, 2010). This shows that with present of…

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