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Economics - Traffic Congestion city problems traffic street transportation Gondomar and Bayona National Income1Traffic Conjestion If a city council faces severe problems with trafficcongestion a knowledge will benefit all parties It is this I willdebate in the lines to come When traffic is a problem in a city all sorts of means oftransportation can be included but it is mainly cars which seem tobe the problem Therefor raising gasolin prices by putting anextra tax on them should instinctively reduce car usage seeingthat costs for the driver would go up This is though only thecase if demand for gasolin is inelastic fig 1 Here a tax ongasoling has moved the supply curve to S2 and the price to P2which has lead the quantity demanded from Q to Q2 The differencebetween Q and Q2 is the essential of the diagram and it is clearthat there has only been a very little decrease in quantitydemanded On fig 2 demand is elastic and again a tax on gasolinhas been introduced moving the supply curve to S2 and incresingthe price to P2 which then has decreased the quantity demanded toQ2 Here the difference on quantity is great It is now easy to conclude that if demand for gasolin isinelastic almost the same will be bought and there will be hardlyany decrease in traffic congestion If demand is elastic quantitydemanded will go down and so will caruse in general leading to afall in traffic congestion in the city centre 3 Gondomar and Bayona If maximum growth rate is a desired goal the proportion acountry spends on consumer goods or investment is highly relevant In the following I will outline the differences between the twocountries Bayona and Gondomar Gondomar has chosen to have a high proportion of its NI spend on investment If this investment goes into factories andbusinesses the investment could turn out to benefit Gondomar in avery positive way
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