In economic systems, what takes place in one sector impacts another; the demand for a good or service in one sector is derived from another. For instance, a consumer buying a good in a store will likely trigger the replacement of this product, which will generate demands for activities such as manufacturing, resource extraction, and related transport. What is different about transportation is that it cannot exist alone, and a movement cannot be stored. An unsold product can remain on the shelf of a store until bought (often with discount incentives), but an unsold seat on a flight or unused cargo capacity in the same flight remains unsold. It cannot be brought back as additional capacity later. In this case, an opportunity has been missed since the amount of transport being offered has exceeded its demand.
The derived demand for transportation is often very difficult to reconcile with an equivalent supply and transport service providers prefer additional capacity to accommodate unforeseen demand (often at much higher prices). There are two major types of derived transport demand:
- Direct derived demand. This refers to movements that directly affect economic activities, without which they would not take place. For instance, work-related activities commonly involve commuting between the place of residence and the workplace. There is a supply of work in one location (residence), and a demand for labor in another (workplace), transportation (commuting) being directly derived from this relationship. Shopping requires physical travel to a store or home deliveries for online purchases. For freight transportation, all the components of a supply chain require movements of raw materials, parts, and finished products on modes such as trucks, rail, or containerships. Thus, transportation is directly the outcome of the functions of production and consumption.
- Indirect derived demand. Considers movements created by the requirements of other movements. For instance, fuel consumption from transportation activities must be supplied by an energy production system requiring movements from zones of extraction, to refineries and storage facilities and, finally, to places of consumption. Warehousing can also be labeled as an indirect derived demand since it is a “non-movement” of a freight element. Warehousing exists because it is virtually impossible to move cargo directly from where it is produced to where it is consumed. Passenger movements also generate service-related movements such as roadside assistance (in case of an accident or mechanical problem).
Transportation can also be perceived as an induced (or latent) demand, representing a demand response to a price reduction. This is particularly the case when the addition of transport infrastructures results in traffic increases due to higher levels of accessibility. Roadway congestion is partially the outcome of induced transport demand as additional road capacity results in mode shifts, route shifts, redistribution of trips, generation of new trips, and land use changes that create new trips as well as longer trips. However, the induced demand process does not always take place. For instance, additional terminal capacity does not necessarily guarantee additional traffic as freight forwarders are free to select terminals they transit their traffic through, such as is the case for maritime shipping.