Induced demand
In economics, induced demand – related to latent demand and generated demand[1] – is the phenomenon whereby an increase in supply results in a decline in price and an increase in consumption. In other words, as a good or service becomes more readily available and mass produced, its price goes down and consumers are more likely to buy it, meaning that the quantity demanded subsequently increases.[2] This is consistent with the economic model of supply and demand.
For other uses, see Induced demand (disambiguation).
In transportation planning, induced demand, also called "induced traffic" or consumption of road capacity, has become important in the debate over the expansion of transportation systems, and is often used as an argument against increasing roadway traffic capacity as a cure for congestion. Induced traffic may be a contributing factor to urban sprawl. City planner Jeff Speck has called induced demand "the great intellectual black hole in city planning, the one professional certainty that every thoughtful person seems to acknowledge, yet almost no one is willing to act upon."[3]
The inverse effect, known as reduced demand, is also observed.[4]
Economics[edit]
"Induced demand" and other terms were given economic definitions in a 1999 paper by Lee, Klein, and Camus.[5] In the paper, "induced traffic" is defined as a change in traffic by movement along the short-run demand curve. This would include new trips made by existing residents, taken because driving on the road is now faster. Likewise, "induced demand" is defined as a change in traffic by movement along the long-run demand curve. This would include all trips made by new residents who moved to take advantage of the wider road.[6]