Transport Flashcards
State the possible reasons for the rise in the use of cars.
Substitute goods may rise in price.
Lower prices of cars or the real price of running cars may be reduced.
Changes in taste or fashion trends.
People begin to travel further to work or shop.
Complimentary goods such as fuel may be reduced in price.
Population growth or increased immigration.
Increased car ownership.
Identify the possible negative externalities arising from increased road congestion.
Reduced house prices near areas of congestion.
Noise/air/visual pollution.
Environmental damage.
Workers may be late to work therefore the cost is the time they have lost.
Increased accidents.
Increased health problems.
Explain why road congestion is an example of market failure.
It has a cost on the third party meaning that SC>PC.
It is overconsumed and overproduced.
Resources are not being allocated to the optimum. There is a misallocation of resources.
The consumers do not pay for the true cost of their actions.
Price paid for the good/service is too low.
Comment upon whether a national road-pricing scheme would reduce congestion.
There is an extra cost for road users.
There will be a lower demand for car usage as the consumer surplus decreases.
People will switch to other methods of transport.
Causes supply to shift left.
This reduces the overconsumption.
Charging on motorways will move congestion to other roads.
If income is high then people will pay the price.
Car use may have inelastic demand.
Depends on the size of the charge.
Must be enforced to be effective which will cost a lot.
Discuss whether giving increased subsidies to firms providing bus services would correct the market failure arising from urban road congestion
Subsidies allow bus companies to lower the cost of production and therefore provide lower fares.
If bus fares fall then there will be an increase in consumer surplus meaning an increase in bus usage,
Depends on the size of the subsidy, as it determines how much fares fall by.
Depends on how subsidies are used, could be on quality.
Firms may use subsidies to increase profit and may not be passed onto the consumer.
PED for buses may be inelastic.
Depends on XED of the two.
Subsidy still may not make it cheaper.
State and explain the possible factors which may lead to fall in road traffic.
Increased fuel prices causes the overall cost of driving to increase…
Falling prices of substitute goods makes them more appealing…
Changes in tastes and fashion…
Increased quality of substitute goods…
Greater congestion increases cost…
Increased cost/taxes of cars…
Explain why road space in the UK is a quasi-public good.
A good which appears to meet the characteristics of non-rivalry and non-excludability but which fails to meet both of these in reality.
Why is congestion seen as a negative externality?
Road congestion results in social costs that exceed private costs.
Comment on the effectiveness of higher fuel prices as a means of reducing car use.
Higher fuel prices increase the overall cost of running a car.
Consumer surplus will fall as less people willing and able to pay higher price for driving.
People will switch to other modes of transport.
Car usage is inelastic in demand.
Depends on size of rise in cost.
Need to be applied internationally as large firms will just relocate across the Channel.
If income is high then it will be ineffective.
Discuss whether a national road pricing system will be effective in solving the market failure arising from road traffic congestion.
The extra charges cause private cost to rise so that they equal social cost.
It raises the cost of running a car.
Causes demand for car usage to fall as consumer surplus falls.
No longer overconsumed therefore misallocation of resources corrected.
Demand for cars can be inelastic meaning the extra cost may not be effective.
It depends on the size of the charge.
Flat rate charges can be regressive.
The traffic will just move to small roads that do not enforce road pricing.
UK haulage firms will see an increase in costs which reduces competitiveness.
State and explain the possible reasons for changes in demand for rail passenger journeys.
Change in price of substitute modes of transport... Change in price of compliments... Increased population... Changes in quality of the service... Changes in tastes and fashion...
Define the term positive externality.
When the purchase of a good/service has a positive effect on somebody not involved in the purchasing of the product (third party).
SB>PB.
Identify the possible positive externalities which may arise from increased investment in the railway network and explain why they are positive externalities.
Increased quality of services…
Increased frequency of trains…
Quicker commuting journeys…
Increased employment for workers.
A third party benefits.
State and explain the barriers to entry into the rail passenger market.
The cost of bidding for a franchise... Sunk costs... Legal barriers (regulations)... Brand loyalty of existing firms... Setup costs involved.
Comment on the extent to which the UK train passenger market in contestable.
Legally, in theory, firms have the right to compete for franchises.
There is open access meaning operators are able to compete in the market.
Privitisation has removed barriers to entry.
No brand loyalty.
There are high start up costs…
Shortage of trained drivers to employ…
Discuss whether or not rail privitisation has been beneficial to the economy.
There is a reduced cost to the government as the rail service is no longer nationalised.
Government earns more revenue by taxing firms who operate rail services.
Profits go to shareholders rather than being invested into the services.
Private firms may ignore private costs to profit maximise.
Many train operators still get subsidies meaning that government expenditure has not fallen.
What is meant by the term transport infrastructure?
Anything that provides for the operation of transport.
State and explain the possible advantages to freight operators using rail as a mode of transport.
They can bulk transit. Lower carbon emissions. Avoids road congestion. More efficient, Firms lower cost of production. Faster journeys.
