Induced Traffic and Induced Demand

Although terms such as “induced demand” and “latent demand” have been used in transportation planning for several decades, the concept of induced demand has not been precisely defined nor has it been translated into an operational form suitable for modeling. This paper defines “induced” as referring to a movement along a travel demand curve, in which the price dimension includes travel time and other user costs. Selecting the relevant demand curve is then an analytic choice. For FHWA’s Highway Economic Requirements System (HERS) model, movement along the within-period, short-run demand curve is referred to as “induced traffic,” while movement along the between-period longrun demand curve constitutes a shift in the short-run demand curve and is referred to as induced demand. The model employs this definition to evaluate highway improvement projects using benefit-cost analysis, incorporating effects of short-run traffic volume on changes in the generalized price, as well as effects of long-run land use and other economic feedback. These features were used in the HERS model to prepare the 1997 “Conditions and Performance” report to Congress.