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Market Failure and
Intervention in Transport
Markets…read more

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Key Stuff: Market Failure!
Market Failure
When there is a misallocation of
resources in a market producing
undesirable outcomes, as a result of
positive or negative externalities
Negative Externality
A spill over effect imposing an external
cost on uninvolved third parties
Positive Externality
A spill over effect imposing an external
benefit on uninvolved third parties…read more

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Market Failure from Negative
Externalities: Diagram
S1 = Marginal
Social Cost
£
Welfare
Loss S=
Marginal
Private
Cost
D = Marginal
Social Benefit
Qty…read more

Slide 5

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Market Failure from Negative
Externalities
Consumers and Transport Suppliers
ignore these externalities
They take into account only their
private costs and benefits
They do not pay the full social cost
and cause over consumption
Resulting in Allocative Inefficiency
For any unit produced/consumed
beyond Q*, society will lose out as
SC>SB…read more

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Negative Externalities in
Transport: Atmospheric Pollution
Transport is responsible for a
large proportion of the UK's
emissions
Global Warming affects
everyone; cause of health
problems is an external cost on
a micro level
Difficult to value…read more

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Comments

davidsalter

This is part of an excellent 3 part presentation on transport economics. It provides some interactivity and would be useful revision for students who need this much detail on this topic.

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