Anonymous asked in Social ScienceEconomics · 7 years ago

homework help needed for a question regarding resource allocation in economics?

#3. traffic congestion is a problem in many cities. Among the possible ways of reducing congestion are allocating more resources to building roads, taxing petrol and subsidizing bus travel.

a) describe how resources are allocated in a market economy. (3 marks)

*please answer the question with explanation, and i also want to know the meaning of resource allocation in simple terms. any help would be greatly appreciated, thanks a ton


b part of question 3:

b) using a demand and supply diagram, analyse the effect of a tax on petrol on the market for petrol.

*please answer this too, thanks

2 Answers

  • 7 years ago
    Favorite Answer

    Got you background information, to help you understand better.Hope helpful.Use this link to view diagram. As the price increases only things that are deemed inelastic, like petrol, cigarettes, are still brought in the quantity as before the price increase. You need to draw something similar. **Building roads resolves nothing.FACT In OZ "Why building roads doesn't ease congestion.OZ "does nothing to reduce traffic In the long run, in fact, it increases traffic. This revelation is so counterintuitive that it bears repeating: adding lanes makes traffic worse. This paradox was suspected as early as 1942 ". USA Common Urban Myths About Transport "Myth: Freeways relieve traffic congestion. Fact:They may provide some shortterm relief, but within a short time the extra road capacity generates more traffic than there was before. In the long term freeways just allow congestion to grow further: they don't reduce it.". UK "Constant congestion cannot be solved by more road schemes." **Taxing petrol hits the poorest the hardest. They need to travel to work. It also hits the disabled who have little lifestyle choice and those who live in the countryside as they have sparse public transport to rely on. The small business man, can't compete on an equal footing with big business, As he can't demand deep discounts, so either he increases his prices, or receives less income.Those on middle or lower incomes, decide to shop in bulk, monthly or weekly instead of daily. Or walk. Trouble is, generally people slip back into their old driving habits. High petrol hits the richest, big businesses (increase their prices, or ask their suppliers for bigger discounts, as they bulk buy), and politicians the least. They waste petrol the most. Endless needless holiday flights and G8, & other pointless Jamborees (a noisy or unrestrained carousal or frolic; a spree)High petrol prices fuel jump in US online shopping. Americans have resorted to buying online instead.They spent $13.8billion online last month, a rise of 19.2% from last April. **Subsidising bus travel. This is the best solution. For the same amount of petrol, more people are ferried from A to B. Its cost effective. But the bus routes, need to be planned carefully. The carrying of bags/prams/packages does cause problems. To be viable long term and successful, they need to be utilized fully. If the service is sloppy, or irregular, or off the beaten track, and not well coordinated with school/work/shopping/airport/industrial estate/hospital hours/leisure, etc, the passenger numbers start to drop, then services get cut back.**HOW MARKETS ALLOCATE RESOURCES "Economies have to find a mechanism to allocate scarce resources because of the economic problem. The What, How, For Whom questions are central to the operation of this mechanism. The mechanism used by different systems:Command economy: Planning mechanism as dictated by the state. Free Market economy: Price mechanism as dictated by consumer spending Mixed economy: A mixture of state planning and the market mechanism. Consumer sovereignty: in a market economy consumers will have the power to influence resource allocation. Their spending decisions will send signals to the producers about what goods to produce and how many to produce. All this will by done through the workings of the price mechanism, eg Consumers decide to buy less carrots. This fall in demand will result in falling prices. In response to falling prices, producers will see reduced profits and will allocate fewer resources to the growing of carrots. If consumers decide to buy more peas, prices of peas will rise and this will encourage producers to allocate more resources to pea production.Therefore the spending patterns of consumers will dictate to producers what they will make, since their motive is profit, & they will not make any if they produce goods which consumers do not want."

    Link below also gives information about command/mixed economies. * "Economic systems. There are two basic solutions to the economic problem of free markets and central planning. **RESOURCE ALLOCATION FREE MARKET ECONOMIES.-

    Source(s): RESOURCE ALLOCATION FREE MARKET ECONOMIES-Free market economies. Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem are called market economies. In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers. Market economies work by allowing the direct interaction of consumers and producers who are pursuing their own self-interest. The pursuit of self-interest is at the heart of free market economics
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  • 7 years ago

    It sounds like an important "homework" for marks?

    If I were you, i'd speak to a tutor and get an accurate answer because you might end up with poor marks if you just copy an answer that's posted here.

    I'm no professional at economics, but I can direct you to a place that can answer this question easily.

    They have tutors who deal with topics like this to help students.

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