1. Traffic Congestion
If a city council faces severe problems with traffic congestion, a knowledge will benefit all parties. It is this I will debate in the lines to come. When traffic is a problem in a city, all sorts of means of transportation can be included, but it is mainly cars which seem to be the problem. Therefor raising gasolin prices (by putting an extra tax on them) should instinctively reduce car usage, seeing that costs for the driver would go up. This is though only the case, if demand for gasolin is inelastic (fig. 1). Here a tax on gasoling has moved the supply curve to S2 and the price to P2, which has lead the quantity demanded from Q to Q2. The difference between Q and Q2 is the essential of the diagram, and it is clear that there has only been a very little decrease in quantity demanded. On fig. 2 demand is elastic, and again a tax on gasolin has been introduced, moving the supply curve to S2 and incresing the price to P2, which then has decreased the quantity demanded to Q2. Here the difference on quantity is great.
It is now easy to conclude that if demand for gasolin is inelastic, almost the same will be bought, and there will be hardly any decrease in traffic congestion. If demand is elastic, quantity demanded will go down and so will caruse in general leading to a fall in traffic congestion in the city centre.
3. Gondomar and Bayona
If maximum growth rate is a desired goal, the proportion a country spends on consumer goods or investment is highly relevant. In the following I will outline the differences between the two countries Bayona and Gondomar.
Gondomar has chosen to have a high proportion of its N.I. spend on investment. If this investment goes into factories and businesses, the investment could turn out to benefit Gondomar in a very positive way. N.I. will go up, and therefor the average GDP pr head will go up as well. This leads to better standard of living....