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Homework answers / question archive / It is not uncommon for major cities to implement policies to reduce the number of cars being brought into the central business district (CBD)
It is not uncommon for major cities to implement policies to reduce the number of cars being brought into the central business district (CBD). Why might governments / cities wish to reduce the number of cars being brought into the CBD? How might they do this (what policies might governments / cities use)? Explain with the use of diagram(s). [2 marks]
(b) There is often litter along highways but rarely in people's gardens. Provide an economic explanation for this fact? [1 mark]
(c) Federal and state governments in Australia recently banned the use of single use plastic bags. Describe the externality that arises from plastic bags and, on a diagram, illustrate how plastic bags create a deadweight loss. [1 1/2 marks]
(d) Why might a complete ban on plastic bags be inefficient?
The major cities, with increasing urbanisation are easy prey to high levels of air pollution especially caused by vehicular traffic, particularly cars. The central business districts are commercially dominant areas which often face delays due to high-severe traffic congestion and where pollution levels are extraordinarily high.
The governments use various policy measures like levying taxes ( indirect taxes), regulating the number of cars and imposing restrictions on vehicular movements, pollution permits, property rights and so on. These measures aim at reducing the impact on environment especially to reduce the social costs as shown in the diagram below, where D or MPB is the demand curve while S1 = MSC is the supply curve, the price of the commodities are increased form P1 to P2 as a result of tax, Total tax paid = P2ABP3, the consumer ‘s burden = P2ACP1, while the part of producer is P1 CBP3. The solution is to contain the spread of social costs.
2 b. People’s gardens are ‘private good’, which are used by people for their own benefit and hence they do not litter them. While highways are ‘public goods’, which can be consumed by everyone one and hence many use it without paying for it and hence they prefer to transfer the burden of maintenance on to someone else.
3 c. Plastic bags pose a major disposal problem, they are the chief reason for sewerage blockages, indiscriminate littering, a killer risk to animals like cows, buffaloes and so on. In the diagram below, the socially desirable price is P1, yet because of inefficient allocation of resources , the price prevails at P2, leaving a dead weight loss to the society , the dotted region shows the ‘dead weight loss’ incurred as a result of usage of resources for production and consumption of plastic bags.4 d. A complete ban on plastics may be inefficient as it may lead to loss of jobs for those involved in plastic bag manufacturing as also a wastage of resources that have already been employed in this industry. , moreover recyclable products like jute, paper are not perfect substitutes for plastic bags .
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