The demand will not rise 1:1, that's a given. It will rise the same way that when gas is cheap people are more likely to take road trips.
For example, I just requested quotes for waterjetting some stuff today. If LTL shipping were cheap enough to I'd look outside the high CoL sphincter of the country where I happen to reside but instead I'm stuck paying a premium because the local cost of everything is high. There's also a cylinder head in my garage for a 60s Ford I'd like to give to someone who needs it but nobody needs it bad enough to pay for me to ship it across the country.
At the higher volume levels similar stuff happens. A construction company may source steel from farther away to undercut it's competition. You can bet the logistics people at Walmart (and anyone else with a big fleet) are drooling over all the optimizations they could implement if trucks could run like call centers.
Lots of products have price elasticity of greater than 1.
Shipping seems like a very elastic industry. If anything, demand would increase by more than 1% for every 1% decrease in cost.
This is because shipping costs if shipping costs are low enough, then you can build something for cheap somewhere else and then ship stuff across the country to high cost of living locations.
YOU wouldn't ship stuff more, but industry would.
IE imagine if something costs 1/3 if it is made in China.
If shipping costs are more then you save, then nobody would ship it. But if shipping costs go down, now you can easy get those cost benefits of across world or across country manufacturing.
Amdahl's law. Shipping is only useful when you have goods to ship. Unless you're selling bricks, shipping is a small portion of the price of most products. Reducing the cost of shipping, which is already a small portion of the price of the product will not result in price elasticity of greater then 1.
For example, I just requested quotes for waterjetting some stuff today. If LTL shipping were cheap enough to I'd look outside the high CoL sphincter of the country where I happen to reside but instead I'm stuck paying a premium because the local cost of everything is high. There's also a cylinder head in my garage for a 60s Ford I'd like to give to someone who needs it but nobody needs it bad enough to pay for me to ship it across the country.
At the higher volume levels similar stuff happens. A construction company may source steel from farther away to undercut it's competition. You can bet the logistics people at Walmart (and anyone else with a big fleet) are drooling over all the optimizations they could implement if trucks could run like call centers.