Road traffic congestion has become an increasingly important issue in recent years. The only way to completely eliminate congestion would be a complete ban on road traffic, but this would not be a socially efficient solution.
- Why are people driving more?
- Why is road congestion and example of market failure?
- What are the private and external costs of congestion?
- Evaluate three alternative remedies for road congestion.
- Should the London congestion charge be applied to other UK cities?
- Why would a complete ban on road traffic be socially inefficient?
The price mechanism works to allocate scarce resources in three main ways: to ration scarce resources; to send a signal to consumers and producers and; to provide incentives to reward certain kinds of behaviour and penalise other types.
Using these three concepts explain how road pricing works to reduce traffic congestion.