A2 OCR Transport Economics F584 2016 (23/06/16)

Yeah, you're just analysing for 15 markers. No evaluation points

15 marker is Definitions, applications and FOR arguments
20 marker is Definitions, applications, FOR arguments, AGAINST arguments and conclusion. This is basically the same as 18 marker from AS

Do you write the evaluations in your arguments? or write them in a seperate paragraph like what is done here?
(Original post by NPETER)
L1 L2
- Define market failure
- When the private consumer ignores the externalities that they cause and pay a price under the social optimum price. Hence, there is an over-consumption and misallocation of resources of the negative externality - such as pollution and blight - good which means that demand exceed the social acceptable supply of the good. This creates an external cost as the polluter does not pay the true cost which creates a welfare deadweight loss to society. As there is a misallocation of resources, there is market failure.
- (In context of the mode of transport of course)
- Taxes may aid in reducing this market failure.

L3
- A tax could be levied onto the producers to increase their cost of production --> this would essentially decrease the level of supply which they can output --> hence, supply shifts inwards and restricts output whilst increasing the price of the good (refer to a drawn negative externality diagram) --> this makes the polluter pay the true cost of the their consumption while allocating resources efficiently --> which internalises the deadweight welfare loss and therefore the market failure.

- Taxes are easy to apply and could be done immediately --> this saves time and quickly reduces the market failure if enforced to an adequate level --> For example, Vehicle Excise Duty VED that ensures that heavier - more environmental unfriendly - vehicles pay a greater price for their use. --> moreover, those who attempt to dodge taxes would be heavily fined --> this incentivises modal switch, buying more efficient (environmentally friendly) vehicles and actually paying the tax.

- Moreover, the tax would increase the level of revenue to the government --> they could use the tax to compensate those who were affected by the "negative externalities" --> for example, they could rehypothecate their additional tax revenue to subsidise households living near a congested road that were affected by the noise pollution in order for them to install double glazing windows --> this would reduce the cost of privately restoring their quality of life and their opportunity cost.

L4
- Hard to determine tax --> tax should equal external cost --> external costs could be physical costs or intangible costs --> physical costs could be calculated but intangible costs cannot be accurately defined --> people may price them differently --> hence there is a level of subjectivity on the weightings of costs --> for example, how to you price the extinction of a species due to pollution? --> It is also time consuming and costly to develop a price for a tax --> and even then it may still be inaccurate.

- if taxes are too high then people modal switch may occur on a large scale and displace the market failure onto another mode of transport --> this would just fragment the market failure and could spread to amongst other forms of transport and make the market failure even more predominant and perhaps entrenched --> causing government failure --> alternatively, it may be too small and encourage users to continue and cause the market failure --> again resulting government failure.

- There is also the opportunity cost of policing where individuals comply to taxes --> though this can be easily enforced as a requirement it is costly --> policing the tax may cost more than the revenue obtained from the tax and therefore making the governments financial position worse --> this can also encourage the growth informal economy as people could dodge taxes and bribe police officers --> essentially, it could be argued that the opportunity cost may have been better as a subsidy to subsidise other modes of transport such as bus services --> this would encourage a more integrated transport and may have encouraged a larger volume of modal switch as a result.

- PED of 'road use' is very inelastic due to the very inelastic demand for cars as road is derived demand --> a very large tax is required to materialise any significant changes in the levels of consumption --> the higher taxes rates would affect lower incomes more than higher incomes --> they may be forced off the road --> this may cause structural unemployment if there isn't an adequate provision of transport --> This may aid in fixing the market failure but it may cause structural economic weakness as a result.

L4+
- could be argued that regulation such as limiting the car ownership to one per family would be better than forcing a tax.
- policing would be just to check on a data base of the population and check if their ownership complies with the regulation
- this would reduce the supply of cars on the road and reduce congestion.

For both to actually work:
- It will depend on the level and seriousness of the government to enforce it.
- If there are adequate substitutes in the economy

I got tired... haha
Please check for mistakes or additional points.

anyone know any papers with coba/cba questions?

just wondering if you give more points than necessary does that mean you lose marks or do they just mark the correct points and ignore the incorrect points.

For example for the 5 marker its 2 marks for analysis, 3 marks for evaluation if for the evaluation you make 4 points and 2 of them are wrong will you still get full mark?

5 marker is 2 for analysis 2 evaluation 1 judgement/conclusion
You don't get marks down but it is not efficient to write a lot of points if you haven't finished the paper yet.

alright thanks. Good luck tomorrow!

Guys , why does Economist seek to put monetary values onto negative externalities?

Section A was nice, probably chose the wrong Section B question lol oops

If part a on section B made no reference to transport application, do you need to bring in transport? So for q2a, it just asked about MC and MR affecting profits, but didn't mention in the transport industry. In some past papers they seem to cap you at 9 for not bringing in transport but others are just theory on the firm and market structure theory, there was one on oligopolies where you just analysed the characteristics.

Hope everyone found it okay

increase in price-lower demand-less revenue generated and vice versa. less revenue is very bad since half of it will end up going to network rail. Elasticity of demand i wrote about as well.
Economic prosperity-commuting, more ppl working, more tax revenue for gov, cheap mode of transport effective for city-city travel for job and bulky items transported over long distances.