Congestion Charge Flashcards

1
Q

externalities

A

one person’s actions affect another’s well-being and the relevant costs/benefits are not reflected in market prices
e.g. air pollution, road damage, congestion etc

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2
Q

MSC (q)

A

marginal social cost

raises by more than MPC as individuals don’t take into account the increase in CC to other dirvers

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3
Q

MPC (q)

A

rises bc journey time increases with no. of drivers

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4
Q

how to get to q*

A

quantity rationing or price rationing

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5
Q

effectiveness

A

with how much certainty can it achieve q*

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6
Q

efficiency

A

which method delivers lowest social cost/biggest social benefit

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7
Q

equity

A

which is fairer?

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8
Q

price rationing

A

pigovian tax
MEC at socially optimal level
MSC(q) - c(q)

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9
Q

effectiveness of price rationing

A

depends on how well we predict MEC - may vary with time, depends on popn, easier to predict I the LR
depends on elasticity of demand for driving

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10
Q

efficiency of price rationing

A

assuming that it’s effective, it’s efficient

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11
Q

equity of price rationing

A

it’s progressive - burden of the tax is being paid by higher income ppl bc they’re more likely to have cars and drive to work

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12
Q

horizontal equity

A

are all individuals treated the same?

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13
Q

vertical equity

A

do higher income pay higher % of their income? if yes = progressive

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14
Q

quantity rationing

A

e.g. Athens - even number even days

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15
Q

effectiveness of quantity rationing

A

yes in the SR in the LR people may buy another car or different number plates - only higher income can afford to do this

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16
Q

efficiency of quantity rationing

A

ignores private benefit of driving

people drive for different reasons bc they have to or bc they want to

17
Q

equity of quantity rationing

A

SR all treated the same but people have different number of cars

18
Q

behavioural perspective

A

extent to which individuals change their decision beyond what we would expect them to do from a purely rational perspective

19
Q

framing effects

A

how we frame the tax hugely impacts take up

20
Q

1st welfare thoerem

A

if no externalities, perfect comp, perfect info, agents are rational, then private market equilibrium is Pareto efficient
(Gov intervention may be necessary if any of these do not hold)

21
Q

social welfare function

A

W(x) a function that aggregates individual utilities u(x) in order to determine the socially optimal choice across policy options

22
Q

to maximise welfare in society

A

we need to maximise welfare of worst-off individual