Deakin University Road Congestion in Australia Questions

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Evfuv0326

Economics

Deakin University

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Question 1: (10 marks)

In your own words, summarize the article, “Road Congestion in Australia” by the Australian

Automobile Association, October 2018, available at this link:

https://www.aaa.asn.au/wp-content/uploads/2018/10/AAA-Congestion-Report-2018-FINAL.pdf.

In particular, what are the main messages of the article? [Hint: Please link your summary with relevant economic theories wherever you can]

Question 2: (10 marks)

Suppose there is a competitive market for road space. The demand for road space falls as the price rises (due to the income and substitution effects). The supply for road space is fixed, which means that the supply curve is vertical. Use appropriate diagrams to answer the following questions:

(a) What is the market price of road space in a competitive equilibrium?

(b) Suppose that road space is a public good, which is freely available to individuals. How much is the excess demand for road space?

(c) Suppose we measure congestion by the amount of excess demand for road space. Can a rise in fuel taxes and car taxes reduce congestion?

(d) Can building more roads reduce congestion? Would your conclusions change if, with more roads, individuals were encouraged to drive more?

Question 3: (10 marks)

Do you think a road-pricing system by charging the use of road space is a good policy to reduce traffic congestion in Australia? Why or why not? Use appropriate diagrams to support your answer. [Hint: Please do literature review to find out the pros and cons of the road-pricing system in terms of economic efficiency and social equity, etc.]

Question 4: (10 marks)

Find two other cities that are among the most congested cities in the world. Give a brief description about the congestion-easing policies in these cities. [Hint: If possible present concrete facts and figures]. Provide your views or suggestions on the best measure/policy to reduce road congestion in Australia.


Students must correctly use the Harvard style of referencing.


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Explanation & Answer

Attached.

Outline
Introduction
Body
Conclusion
References


Running head: ROAD CONGESTION IN AUSTRALIA

Course title
Student name
Institution affiliation

1
ROAD CONGESTION IN AUSTRALIA
Summary of Road Congestion in Australia
Question 1
Road congestion is one of the significant problems that commuters experience in their
daily lives in major towns and cities. Many times, the congestions result from unexpected
events including; accidents, blockage of roads during protests, and power outages. However,
the most common cause of road congestion is the fact that many commuters use the same
road at the same time. The presence of too many vehicles on the road at the same time cause
clogging of roads and makes it difficult for everyone to reach the desired destination in time.
The traffic congestion mainly occurs during the morning and evening hours when
people commute to work and home respectively. This paper summarizes the economic and
social problems of road congestion in Australia. Also, it analyses the impacts of road
congestion on the economic, efficient equilibrium of the market, policies to reduce
congestion, and possible economic effects of particular policies.
Economic and Social Issues of Road Congestion in Australia
The issue of road congestion is linked to various issues relating to costs, time delay,
and stress. In Brisbane, the increasing levels of congestion are predicted to cost $1.59 billion
annually. This will result in a 90 percent increase to the usual annual value of $3 billion by
2020. Also, the traveling time has increased in Australia by 28 percent. The figure translates
to an additional 27 minutes on the road during congestions, a situation that delays the
commuters. Spending too much time on the road causes stress and strain (Zawack and
Thompson, 1987). Besides, emergency vehicles such as ambulances find it difficult to reach
their destinations in time during traffic congestions. Increased traveling time due to jam cause
people to report late to jobs, and this impacts greatly on the national economy. Besides, the
congestion results into $1 billion extra air pollution cost.

2
ROAD CONGESTION IN AUSTRALIA
Impacts on Economic Efficient Equilibrium of the Market
Based on the produced negative externality model to show the effects of road
congestion in Australia, the marginal private cost provides the allocative and productive
efficiencies. The two efficiencies occur at the point where the marginal cost curve intersects
with the demand curve, thereby creating the efficient equilibrium. The number of road users
and the per-user price all exist at the efficient equilibrium. Conversely, the negative
externalities such as business, pollution, and vehicle costs, force the supply curve to shift to
the left. The left shift creates a new supply curve known as the marginal social cost road use.
A new equilibrium is attained, and this forces the number of road users to decrease, and the
cost of road use to increase. Besides, the shift results in a deadweight loss in the market.
Policies to Reduce Road Congestion
Following the issue of road congestion in Australia, the Brisbane City Council
proposed various measures to curb this issue. They decided to implement a road improvement
program, with a budget allocation of $1.3 million, running from 2016 to 2020. The first
policy implemented to reduce road congestion was decreasing the demand for road space.
This can be achieved through raising the costs of fuel, establishing priority lanes for public
transport, removing all parking lanes along the town streets, and enforcing strict traffic rules.
Increasing the fuel prices makes the commuters to develop cautiousness when using the road
so that they don’t run a loss on fuel expenditure. ...


Anonymous
Very useful material for studying!

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