Explain why the growth in the demand for freight transport has been roughly the same as that of GDP.

The key thing to understand here is that freight transport is a derived demand because it arises as a consequence of an increase of demand for something else. In this case, GDP is increasing therefore there have been increases in the components of GDP (aggregate demand) which are consumption (C), investment (I), government spending (G) and net exports (X-M). We can say for example that as GDP increases, this implies that there has been an increase in consumption levels meaning that there is a consequent need for more goods to be moved to market. Freight transport is an efficient and cost effective way of moving large quantities of goods to market therefore as GDP continues to grow, more goods are being produced in the economy meaning there is an increased demand for freight transport as a means of moving these goods to market. It is essential here to grasp the concept of derived demand and also learn the components making up GDP which will help you get through the question.

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Answered by Stuart M. Economics tutor

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