Decent Essays

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 …show more content…

A reduction in quantity will therefore will reduce congestion as there will therefore be less cars on the road.

Thirdly, the government could adopt a road pricing system by charging for the use of road-space. Road pricing has been used in Singapore, where electronic detectors are placed on bridges and drivers are charged for access to the road-space, that is, access to the road network.

One problem with schemes to alter people’s behaviour to achieve desired outcomes is that the reverse can happen, and people behave perversely. 
For example: speed cameras positioned at regular intervals on roads may encourage drivers to ‘speed up’ between cameras, speed bumps on roads may encourage people to take longer trips to avoid them, hence increasing congestion and pollution, as the costs of driving in London have increased, the illegal dumping of cars has also

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