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Induced demand, or latent demand, is the phenomenon that after supply increases, more of a good is consumed. This is entirely consistent with the economic theory of supply and demand; however, this idea has become important in the debate over the expansion of transportation systems, and is often used as an argument against widening roads, such as major commuter roads. It is considered by some to be a contributing factor to urban sprawl.
Effect in transportation systems 
Latent demand has been recognised by road traffic professionals for many decades. J. J. Leeming, a British road-traffic engineer and county surveyor between 1924 and 1964, described the phenomenon is his 1969 book:
Motorways and bypasses generate traffic, that is, produce extra traffic, partly by inducing people to travel who would not otherwise have done so by making the new route more convenient than the old, partly by people who go out of their direct route to enjoy the greater convenience of the new road, and partly by people who use the towns bypassed because they are more convenient for shopping and visits when through traffic has been removed.
He went on to give an example of the observed effect following the opening of the Doncaster Bypass section of the A1(M) in 1961.
Price of road travel 
A journey on a road can be considered as having an associated cost or price (the generalised cost, g) which includes the out-of-pocket cost (e.g. fuel costs and tolls) and the opportunity cost of the time spent travelling, which is usually calculated as the product of travel time and the value of travellers' time.
When road capacity is increased, initially there is more road space per vehicle travelling than there was before, so congestion is reduced, and therefore the time spent travelling is reduced – reducing the generalised cost of every journey (by affecting the second "cost" mentioned in the previous paragraph). In fact, this is one of the key justifications for construction of new road capacity (the reduction in journey times).
A change in the cost (or price) of travel results in a change in the quantity consumed. This can be explained using the simple supply and demand theory, illustrated below.
Elasticity of transport demand 
For roads or highways, the supply relates to capacity and the quantity consumed refers to vehicle-kilometres travelled. The size of the increase in quantity consumed depends on the elasticity of demand.
A review of transport research suggests that the elasticity of traffic demand with respect to travel time is around −0.5 in the short-term and −1.0 in the long-term. This indicates that a 1.0% saving in travel time will generate an additional 0.5% increase in traffic within the first year. In the longer-term, a 1.0% saving in travel time will result in a 1.0% increase in traffic volume.
Sources of induced traffic 
In the short term, increased travel on new road space can come from one of two sources: diverted travel and induced traffic. Diverted travel occurs when people divert their trip from another road (change in route) or retime their travel (change in timing). For example, people might travel to work earlier than they would otherwise like, in order to avoid peak period congestion - but if road capacity is expanded, peak congestion is lower and they can travel at the time they prefer.
Induced traffic occurs when new automobile trips are generated. This can occur when people choose to travel by car instead of public transport, or decide to travel when they otherwise would not have.
Shortening travel times can also encourage longer trips as reduced travel costs encourage people to choose farther destinations. Although this may not increase the number of trips, it increases vehicle-kilometres travelled. In the long term, this effect alters land use patterns as people choose homes and workplace locations farther away than they would have without the expanded road capacity. These development patterns encourage automobile dependency which contributes to the high long-term demand elasticities of road expansion.
Induced demand and transport planning 
Although planners take into account future traffic growth when planning new roads (this often being an apparently reasonable justification for new roads in itself – that traffic growth will mean more road capacity is required), this traffic growth is calculated from increases in car ownership and economic activity, and does not take into account traffic induced by the presence of the new road (i.e. it is assumed that traffic will grow, regardless of whether a road is built or not).
In the UK, the idea of induced traffic was used as a grounds for protests against government policy of road construction in the 1970s, 1980s and early 1990s, until it became accepted as a given by the government as a result of their own SACTRA (Standing Advisory Committee on Trunk Road Assessment) study of 1994 . However, despite the concept of induced traffic now being accepted, it is not always considered.
A classic example of induced demand was the construction of an orbital motorway around London, the M25, in the late 1980s and early 1990s. In the short term (almost from opening), the motorway became extremely busy and often congested (as planners underestimated the level of demand, because some was induced, and thus the road did not have high enough levels of capacity to accommodate it). In the long term (over a few years), new development occurred around the new motorway and people adjusted their home and work locations to depend upon it, further increasing demand.
Despite this, a comparison of congestion data from 1982 to 2011 by the Texas A&M Transportation Institute clearly demonstrated that additional roadways reduced the rate of congestion increase. When increases in road capacity were matched to the increase demand, growth in congestion was found to be much lower.
Mitigating the induction of demand 
Induced traffic can be avoided if the generalised cost of travel does not decrease when new road capacity is added (known as "locking in" the benefits (e.g. journey time reductions) of new capacity). This may be achieved through:
- Road pricing – i.e. the user pays for the journey time reduction
- Increasing the cost of parking, by limiting parking spaces. This has been done with success in Sydney, Australia.
- Allocation of the new road space to particular users, e.g. using HOV lanes – the generalised cost of travel for some users will remain similar, but the cost for particular users will decrease, encouraging a shift to that use. HOV or multiple occupancy lanes are the classic example, an example being the widening of the M1 motorway to the north of London, where the extra capacity will be used for an HOV lane during the peaks. However, HOV lanes which are additional to existing capacity do result in an induced rise in overall traffic, because the shift of HOVs to the new lane releases capacity in the existing lanes, reducing the generalised cost of journeys in those lanes and thus increasing demand.
- Zoning to prevent excess development of new areas served by increased road capacity has been proposed as a solution; however, municipalities often lack the power or the will to counter development interests.
- Increasing the cost of travel, for example by increasing fuel excises or car registration costs.
- Increasing the cost of drivers licenses in certain undesirable motor vehicle classes (such as SUVs), while decreasing costs for more desirable modes of transportation (such as buses).
Reduced demand (the inverse effect) 
Just as increasing road capacity reduces the cost of travel and thus increases demand, the reverse is also true – decreasing road capacity increases the cost of travel, so demand is reduced. This observation, for which there is much empirical evidence, has been called Disappearing Traffic, also traffic evaporation or traffic suppression. So the closure of a road or reduction in its capacity (e.g. reducing the number of available lanes) will result in the adjustment of traveller behaviour to compensate – for example, people might stop making particular trips, condense multiple trips into one, retime their trips to a less congested time, or switch to public transport, walking or bicycling, depending upon the values of those trips or of the schedule delay they experience.
Reduced demand has been demonstrated in a number of studies associated with bridge closings (to be repaired) or major roads rehabilitation projects. These studies have demonstrated that the total volume of traffic, considering the road or bridge closed and alternative roads which this traffic is diverted through, is lower than that in the previous situation. In fact, this is an argument to convert roads previously open to vehicle traffic into pedestrian areas, with a positive impact on the environment and congestion, as in the example of the central area of Florence, Italy.
Similarly, reducing public transit services will reduce to some extent the use of those facilities, where trips again may be abandoned or switched to private transport.
The debate 
Opponents of roadway widening argue that evidence shows encouraging development many kilometres away from jobs and services, freeways contribute to increasing traffic flows, and thus the freeway ends up just as congested as previously, thus requiring the freeway to be widened (again).
Proponents of roadway widening will note that the fact that there is additional travel indicates that the roadway construction or expansion is adding value to those users (consumer surplus). This argument ignores that consumer surplus of a group of road users does not guarantee an increase in aggregate utility. It also ignores that some negative externalities such as global pollution often go unvalued in economic analyses of road projects (some countries ignore these externalities altogether, and others evaluate them qualitatively).[not relevant?]
Some roadway advocates note that because of underlying factors (e.g. population and income growth), traffic will grow anyway, whether or not freeways are expanded (this being the argument mentioned previously in relation to traffic forecasts). Thus, without widening, traffic would be even worse than it is, contributing even more pollution, something which occurred in Sydney, Australia, during the New South Wales state government's "No Freeways" era in the late 1970s and early 1980s. Opponents reply that the new induced traffic will generate more pollution and exacerbate the greenhouse effect more than leaving the road unbuilt or unwidened.[not relevant?]
See also 
- Downs–Thomson paradox
- Lewis–Mogridge Position
- Say's law
- Positive feedback
- Traffic flow
- Schedule delay
- J. J. Leeming (1969). Road Accidents: Prevent or Punish. Cassell. SBN 304932132.
- Goodwin, P. B. (1996). "Empirical evidence on induced traffic: A review and synthesis". Transportation 23: 35–54. doi:10.1007/BF00166218.
- Litman, T. L. (2011). "Generated Traffic and Induced Travel: Implications for Transport Planning".
- Texas A&M Transportation Institute. "2012 Urban Mobility Report". Retrieved May 14, 2013.
- Giles Duranton, Matthew A. Turner (2010), The Fundamental Law of Road Congestion: Evidence from US cities, University of Toronto
- UK Department for Transport guidance on modelling induced demand
- A statistical analysis of induced travel effects in the US mid-Atlantic region (Fulton et al.), Journal of Transportation and Statistics, April 2004 (PDF)
- Todd Litman (2001), “Generated Traffic; Implications for Transport Planning,” ITE Journal, Vol. 71, No. 4, Institute of Transportation Engineers (www.ite.org), April, 2001, pp. 38–47.