The Economics in an International Context - Essay Example

Economics in an International Context Economics in an International Context Introduction Road space is considered as a scarce resource, to mean that the more private road users increase, the less the road becomes available for use by others. Policy makers want to view roads, which were earlier seen as public goods, as private goods that can be paid for before its use. Advancement in technology, such as that of GPRS has enabled the use of roads to be easy to man, hence easy to charge for road-space (Frankena, 2003). Congestion of roads results into travelers paying high costs for travelling, increase in business cost and some road users for emergency services like ambulances, fire engines as well as police vehicles also find hard time trying to provide their services to the people. In addition, there is a huge lot of pollution that is increased due to road congestion. It is more probable for an accident to occur when there is increased congestion as well as an increase in stress on driver, pedestrians and also the cyclists. Economists, through the concept of demand and supply theory, assume that the road-space demand will always go down when the price paid for it increase. This is so due to the income and substitution effect of a higher price. When the road-space is free, its demand becomes more than its supply. This can lead to expressing congestion as an external cost of consumption. It means, there is a welfare loss due to too much driving. Economic Solutions to Road Congestion To provide economic solutions to road congestion problem, economists can apply three main methods. They can either increase the supply for road-space, increase the price for road-space or reduce its demand. Increasing Road-space Supply This is the most direct way of sorting out the problem of congestion on roads. It is logical that congestion could be caused when there are few roads in a city or a town or anywhere that we demand the road-space supply. It is also true that when there is when there is a low supply of any good, other factors remaining constant, its demand increases. Therefore, with an increased demand and the available roads that can be used are few, there will be congestion (Lave, 2001). To increase the supply of road-space, the government can build more roads that can be enough for its users. When there are more road space added, all the road users will find adequate space to use without necessarily causing congestion. However, other problems are there that are associated with increasing of road space. When doing this, the government must meet some opportunity costs. As we know that the government usually works on a budget and building roads is usually a very expensive venture. When a government decides to put money on building more roads in order to increase road-space, there is a lot of the government’s money that must be pumped into this kind of activity. In addition, when the road space has been increased, there will still be an increase in road use, where those who were not using the road before increase and begin using the road, hence increasing pollution. Other road users will find new good and free roads that are enjoyable to use, hence they begin speeding that leads to increase in the accidents rate. There is a rightward shift in demand when the roads are increased. This encourages more drivers to drive on the road and to drive faster. Wen drivers are encouraged to drive, demand for road space still will increase. Increase in the demand for road-space makes the road-space demand to shoot hence, a rightward shift in demand (Small, 2003). When demand for road-space shifts to the right, there still is congestion of the road. A large cost of building these roads is incurred. There is also an opportunity cost for building the road. Reducing the Road-space Demand Any scarce good is usually highly on demand. Many people would like to use the good, sometimes even at high prices. However, the supply of the good is too low. As we know, when there are many drivers on the road, there is an increased congestion on those roads. One way, therefore, for reducing the congestion is through reducing the road-space demand. There are two major ways that can be used to reduce road demand. To begin with, we can apply the method of decreasing ownership of cars. To reduce car ownership can be done through increasing the car prices. When the prices of cars increase, only few people will purchase them, hence there will be few people using the roads. This will definitely reduce the demand for road-use. When the prices of cars are increased, few cars will be on the road, hence there will be less congestion. We shall have reduced the demand for road-use in a way to solve our problem of road congestion. A leftward shift in demand can cause reduction in road congestion. The second method we can apply to reduce the demand for road-use is by reducing the car usage. We can reduce car usage through various ways. One, the government can develop a policy that restraints entry of personal cars into some areas such as city centers. Only public means can be used. In this way, many people will use public transport and leave their cars at home. When they leave their cars at home, there will be a reduction in road usage, hence a leftwards shift in demand for road-use. Another way that can make car usage reduce is the increase of fuel prices. The government can increase the tax on the fuel prices, making fuel prices to increase, hence many will consider using private cars as expensive (Cook & Rush, 2006). When this happens, many car users will avoid using their private cars that usually cause congestion on the rods. Instead, they will cost share and use a single car by several people, or just decide to use a public means of transport so that they can reduce on the number of vehicles on the road. When the government increase the fee used to obtain a driver’s license, there will be few drivers on the road. As we know, cars are operated by drivers. When they are few, few cars will be on the road, hence reduction of road congestion. To reduce car usage, the government can also raise the age limit for driving. If an 18-year old could drive, let it be 24. It will mean that only few people will be able to drive since they have to be 24 to obtain a license to do so. It is also easy to regulate and reduce car usage when the parking fees are increased. Cars must be parked in the city when we want to access some offices to attend to our duties. When the parking fees are hiked, many people will stop using them or just leave them at home to use public means in order to avoid such expensive fees. This will reduce congestion in the city. Increase Prices for Road-use The third method for reducing congestion is by introducing road pricing. This is a system where the government can charge for road use. Electronic detectors can be placed on bridges that charge drivers for using the road-space (Goodwin & Jones, 2009). All the road network should be fitted with such devices to enable road use to be charged. When this happens, many people will refrain from using cars anymore because it will be expensive to do so. When there is an increased access to roads even with this system, the government can decide to increase prices charged for road-use. When this happens, few drivers will afford to access the roads. This will definitely reduce congestion. Bibliography Cook, K. & Rush, P., 2006. COnsumer Awareness of Motor Fuel Tax Rates and Prices. Washington, D.C.: Highway Research Board 138. Frankena, M., 2003. Income Distribution and Transit Subsidies. Journal of Transport Economics and Policy, Volume 7, pp. 215-30. Goodwin, P. & Jones, P., 2009. Road Pricing: Principles and Applications. Paris: ECMT Round Table 80. Lave, L. R., 2001. Congestion and Urban Location. Papers of the Regional Science Association, 25. Small, K., 2003. The Incidence of Congestion Tolls on Urban Highway. Journal of Urban Economics, Volume 13, pp. 90-111. Read More