[asoneth]

Increasing public transit capacity does induce demand. In areas with excellent public transit people choose to live further away from work, take more discretionary trips by transit, etc. (That's one reason I would be wary of making transit free as some politicians have proposed.)

One reason many people are more concerned about inducing driving demand is that private vehicle travel generally emits more carbon, uses more valuable land (e.g. parking, highways), and results in more fatalities per person per mile than comparable forms of transportation.

Another problem with inducing driving demand is the degree to which those costs are subsidized by taxpayers (roads, highways), other shoppers (required/subsidized parking), or left as externalities (carbon, noise). Tolls, gas taxes, per-mile fees, and parking fees would have to be quite a bit higher in most places to cover those costs.