Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Applied Micro > Congestion charge > Flashcards

Congestion charge Flashcards

1
Q

why is congestion a problem

A

externalities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

externalities d

A

one person’s actions affect another person’s well-being and the relevant costs and benefits are not reflected in market prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what are the externalities of driving

A 
local air pollution,
global pollutants,
congestion,
accidents,
noise,
road damage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

why is congestion bad

A

as traffic volumes increase in a given road space, the average speed of all vehicles slows down, and time costs are thus imposed on other road users

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

how is the MPC (marginal private cost) affected by congestion externalities

A

it rises because journey time increases with number of drivers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

look at diagrams for congestion

A

in folder in designated area

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is the marginal external cost

A

marginal social cost - marginal private cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

how do you show marginal external cost on a diagram

A

first page of written notes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

where is the initial equilibrium for the externalities diagram

A

where MPC = P(q) (demand)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

where is the socially optimal point for externalities

A

where MSC = P(q) (demand)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the two ways to get from the initial point to the socially optimal point q* for congestion externalities

A 
quantity rationing (typically based on number plates only let certain drive at certain times),
price rationing (increase price until get to point)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

example of where they used quantity rationing for congestion charge

A

athens drivers with even numbered plates on even days of the month and odd on days of the month with odd numbers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is a pigovian tax (also spelled pigouvian)

A

a tax on any market activity that generates negative externalities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is a pigouvian tax (pigovian) intended to do

A

correct an inefficient market outcome by being set equal to the social cost of the negative externalities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what does the pigouvian tax need to be set equal too

A

the social cost of the negative externalities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what are the problems with road pricing in practice

A 
uncertainty about estimating msc and mpc etc,
technology and administration costs,
public opinion (people might not like so vote against etc)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what are the things you need to consider when thinking about quantity versus price rationing *

A

effectiveness (what is going to achieve q* with more certainty),
efficiency (which delivers lowest social cost/biggest social benefit),
equity (which is fairer)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what does equity mean for congestion charge

A

which is fairer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what does effectiveness mean in terms of the policies for congestion charge

A

which is going to achieve q* with more certainty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what does efficiency mean in terms of the policies for congestion charge

A

which delivers the lowest social cost/biggest social benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is the effectiveness of quantity rationing

A

effective in the short run, in the long run households may adapt (multiple cars/license plates)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what is the efficiency of quantity rationing

A

does not account for demand for driving, some may be more affected than others, buying second car more costly than congestion charge

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is the equity of quantity rationing

A

in the short-run all treated the same, cost of rationing may be increasing with income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what is the effectiveness of price rationing

A

need to know marginal external cost (hard to calculate) may be easier to calculate in the long run,
also need to know elasticity of demand for driving which may vary between short and long run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
what is the efficiency of price rationing
assuming effective, this would be socially efficient
26
progressive tax
proportion of tax you pay increases as your income goes up
27
is a congestion charge a progressive or regressive tax
as a flat rate it is regressive because the lower income you have the higher that is as a percentage of your income
28
talk about whether price rationing is equitable
horizontal - yes because all individuals are treated the same, vertical - higher income individuals do not pay a higher percentage of income but also depends on who benefits from the proceeds from the congestion charge
29
what is the behavioural perspective of congestion charge
effectiveness of price rationing depends on price elasticity of demand for driving, extent individuals change their decision beyond what we would expect them to from a purely rational perspective (ex 5p plastic bag)
30
example of behavioural perspective for congestion charge
5p plastic bag tax changes perspective
31
facts about london congestion charge
flat charge applied to vehicles driving into or within central charging zone, introduced 2003 by Ken Livingstone, initially seen as huge risk, now seen as very successful
32
was the london congestion charge (2003) seen as successful or not
initially seen as huge risk, now seen as very successful
33
what are the costs of the congestion charge
people have to pay the charge, | costs of implementing and running the scheme, increased costs to people who no longer drive
34
what are the costs of implementing and running the scheme
measurements, cameras and signs, tickets that are sent out and collected, system needed to deal with those
35
what are the benefits of the congestion charge
``` revenue from the charge, reduced congestion (faster journey times), improved air quality, more pleasant environment ```
36
what are total direct costs for the congestion charge (2005)
£133m
37
what are the total revenues from the congestion charge (2005)
£120m charge penalties, £70m penalty payments, £190m total
38
what is the revenue - cost for the congestion charge (2005)
£190m - £133m = £57m financial surplus
39
what do you need to know to measure the benefits of reduced cost of driving
how many people still drive, how much did 'cost' of driving fall (faster journey times), what is the monetary value of those time savings
40
what do you need to know to measure the lost consumer surplus for people who stop driving
how many people stopped driving, | how much did they value those journeys (net of cost)
41
what were the outcomes from leape
speed up 17% which has reduced journey times by about 10 mins per trip, reliability savings assumed to be 30% of time savings
42
what are two ways of establishing what the value of time is
direct approach - ask individuals how much 10 mins is worth to them financially (subject to a lot of bias), revealed preferences - observe decisions of individual and through decisions work out value of time to them
43
explain revealed preference approach to measuring the value of time
``` gross wage (pre-tax) = measure of marginal productivity, survey informations on wages of different types of passengers ```
44
what are assumptions of revealed preference approach to measuring the value of time
workers are paid their marginal product of labour, unproductive time -> productive time (eg no leisure), no (dis)utility of travelling, small savings can be grossed up
45
example of a choice experiment for working out how much people value time
individuals presented with two hypothetical choices for a journey one quicker and more expensive and the other cheaper and slower and were asked to choose which they would prefer
46
what is public economics
study of the role of the government in the economy
47
how is the government instrumental in economic life
government in charge of huge regulatory structure, taxes, expenditure, macro-economic stabilisation through central bank
48
what is normative public economics
analysis of how things should be
49
what is positive public economics
analysis of how things really are
50
what does paternalism mean
individual failures do not exist, people know exactly what they want the whole time that they believe is best for them, only reason government gets involved is to impose its own preferences against individual's will
51
what does individual failures mean
individual and market failures exist, sometimes people behave irrationally, government needed for pensions etc
52
what is Pareto efficiency
where no one person in society can be made better off without making someone else in society worse off
53
example of when pareto efficiency doesn't make sense
if one person in society has all the wealth it is pareto efficient (because would make that one upset if distributed)
54
what is the pareto condition
if every individual prefers any alternative x to another alternative y, then society must prefer x to y
55
why might government intervention be desirable
externalities, imperfect competition requires regulation, imperfect of asymmetric information, agents are not rational (myopic agents might not save enough for retirement)
56
what is a social welfare function
a function that aggregates individual utilities in order to determine the socially optimal choice across policy options
57
what does consequentialism mean
actions are judged only by their consequences
58
Sen's capabilities approach
outcomes should be measured by the opportunities and capabilities that they create or destroy for individuals
59
what did plato suggest about wealth and power
plato suggests that the wealth and power of the most well-off should not be allowed to exceed that of the worst-off by more than 4 to 1
60
what is the elasticity of speed with respect to quantity of drivers
how sensitive is speed on the road with respect to the traffic volume on that road
61
what is pcu
for a car it is 1 and trucks are 1.5-3, | trucks have a higher impact in terms of congestion compared to cars so scales up the mcc
62
what do drivers not take into account
the negative effect that them driving has on the effect on the speed of everyone else
63
what is a Pivovian tax (also spelled Pigouvian)
a tax on any market activity that generates negative externalities (costs not included in the market price)
64
what does a tax on congestion do to the private cost for the drivers
tax increases the private cost for the drivers so it internalises the external cost
65
what does the carrot and stick mean
metaphor for use of a combination of reward and punishment to induce desired behaviour, cart driver might activate a reluctant mule by dangling a carrot in front of it and smacking it on the rear with a stick
66
what is the stated preference approach to valuing time
choice experiments, individuals presented with hypothetical choices with trade-offs to identify valuation
67
what are the three social welfare approaches
utilitarian approach, Rawlsian approach, capabilities approach
68
what is the utilitarian approach
treat money as utility, would choose the policy with the highest overall monetary payoff across the population without distributional considerations. if assume concave utility we might put greater weight on benefits for lower-income citizens (higher marginal utility of income)
69
what is the Rawlsian approach
says that society is only as well off as the worst-off individuals in society, following this the proceeds of the charge would go towards programs to alleviate cost and negative impact of the congestion charge for lower-income households in the city
70
what is the capabilities approach
interested in the freedom to achieve well-being, would consider how to improve the potential to earn for residents of bristol, focusing particularly on deterred drivers which we said are likely to be low-income

Applied Micro (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions