Car Ownership And Personal Cars

Car Ownership

Car ownership is a large determinant of the use of transportation that individuals utilise. Cars are not necessarily cheap and considering that they depreciate in value, owners tend to use them exclusively so they feel as if they’re maximising their investment and satisfaction with their purchase.

Level of Personal Income

Personal income will affect the transportation choices that individuals can make. A limited income acts as a constraint, which may reduce and restrict the transportation choices at their disposal. If they cannot afford a car which they deem to be reliable, they may be stuck with commuting via bus and/or train. Individuals who have a large disposable income will typically maximise their satisfaction by opting

Individuals who drive cars will systematically perceive the travel characteristics (cost, travel time, ease of use and so on) as being better than they truly are – this is due to limited exposure as observed throughout behavioural economics. Perceptions of travel are also commonly derived from the media and advertisements. Cars are often promoted as objects of status, power, luxury and personal freedom.

Availability of Public Transportation

Residents who live within Perth and Sydney’s inner-city suburbs are likely to have fantastic public transport infrastructure at their doorstep. Residents living in outer suburbs are typically not as fortunate and in some areas, makes car ownership more or less of a necessity. Even when public transportation services are available, services which fall outside of ‘peak hours’ are often infrequent and the distance between bus stops and stations can be significant. This can result in further inefficiency and less reliance for individuals.

Time and

If an individual’s income were to increase however, the demand for the cheap cars will decrease while the demand for costly cars will increase. Therefore, cheap cars are considered inferior goods, while luxury cars are considered normal goods when income is low, individuals tend to opt for public transport.

For example, consider the two graphs below. The graph on the left is representative of two normal goods, in this (ridiculously expensive) instance; a luxury car and a jet ski. The graph on the right, is representative of two inferior goods, in this instance; steak and hamburgers.

Prices of Vehicles: As previously mentioned, a car can be both a normal and an inferior good – dependent upon its relative price and the individual’s income. If the prices of cars in general increase, the demand for cheaper cars will obviously increase. Public transport also becomes an appealing substitution as individuals can save money on not needing to buy / own a car, depending on their level of