Question

TRAFFIC on Sydney’s clogged roads and motorways is now so congested it is costing the majority of businesses in Western Sydney up to $5000 a year. The startling figures were revealed as part of the NRMA Motoring & Services BusinessWise survey of almost 730 businesses that run vehicle fleets. Frustrated local businesses who took part in the survey said travel times for each of their work vehicles had jumped, on average, by 59 minutes every day due to roads clogged by commuters forced into their cars because of poor public transport options. In the past year about six out of 10 Western Sydney firms said their fuel bills had risen as a result of congestion .......

Identify the negative externality discussed in the article? Explain, using a graph, how the negative externality leads to an inefficient price and level of output.

Answer 1

Excessive traffic has caused congestion and increased fuel bills andatike to transit which has been the negative externalities in this case.

This leads to an inefficient price as the pricing of petrol or fuel will rise considering higher quantity demanded and hence higher demand.