1.Traffic 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 P2,which 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 N.I. spend on investment. If this investment goes into factories andbusinesses, the investment could turn out to benefit Gondomar in avery positive way. N.I. will go up, and therefor the average GDP prhead will go up as well.
This leads to better standard of living. Drawbacks which must also be kept in mind is worsening of nature,pollution, and other external social costs the society will have tolive under. Bayonas approach is much more passive, in the sense that shedoes not strive to achieve growth in the same way as Gondomar. Thespending on money here is mainly spend on consumption, which meansthe economy is more focused on import. If relatively is beingproduced, N.I. will go down and standards of living will go withit. Overall it is clear that a policy which focuses on investmentrather than consumption, is more likely to benefit on longterms.
4. National Income Several problems occur when trying to meassure nationalincome. Even if many factors have to be considered before arrivingat a result. The first problem which comes to mind, when consideringproblems, is the fact that the data collected could easily beunexact. For example is there a very large informal sector in manyunderdevoped countries. This informal sector includes everythingfrom theft to prostetution. All of this activity is very difficultto anthing but an estimate of. The informal sector does not includefarmers providing for themselves, but this is also unrecorded, andshould not be left out, when calculating N.I. Meassuring breadwhich is sold, is realtively easy, while services and certaincommodities, usually within the public sector, do not have a price.
Here productivity will tend more to an estimate, than an excactvalue, when adding this number up to N.I.Finnally when the N.I. has been added up, there is a final problem. N.I. is usually only helpful when used to compare with othercountries economy, and therefor the various N.I.’s have to beexchanged on paper to a common currency (usually the dollar) forbetter comparison. Here the value of N.I. will natuurally varyaccording to the exchange rate, and not the productivity. Concludingly, it should be stated that all of the abovevritirias should be met when calculating N.I. if a correct figureis desired.