Essay on Congestion

736 Words Mar 11th, 2016 3 Pages
Using the data and your economic knowledge, assess which is the best policy that the UK government could adopt to reduce congestion on the roads (25 marks)

Market failure is where there is a misallocation of resources in the economy, either completely failing to provide a good or service or providing the wrong quantity. A negative externality, which is the same as an external cost, occurs when the consumption or production of a good causes costs to a third party, where the social cost is greater than the private cost.
There are a several reasons why roads have become increasingly congested, including the following: The real cost of driving has fallen because motor cars, and even petrol, are relatively cheaper than they
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There are three basic remedies for road congestion, including increasing supply of road-space, reducing demand and increasing price. Firstly, government can increase the supply of road space by building more roads.

However, with more roads, drivers are encouraged to drive and the demand for road space increases. Demand shifts to the right, and congestion still exits. In addition, there are large building costs and an opportunity cost. There is also a long time lag between planning and availability. Demand for road-space can be reduced in two ways; by decreasing car ownership or by decreasing car usage.

Measures might include: raising fuel taxes and car taxes, increased driving license fees, providing bus lanes, better public transport, and no-parking routes, such as the UK red route scheme, operating park and ride schemes, increasing parking charges, raising the age limit for driving, legislating on the number of passengers in cars. However, set against these are: the costs of implementation, the UK’s strong preference for cars. If successful, there could be a loss of jobs in the car industry, and lost revenue to firms who rely on traffic flow. The introduction of tax as a form of government intervention is

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