Economics in an international context Essay Example | Topics and Well Written Essays - 1250 words

Economics in an international context - Essay Example 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. 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. 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