"Road Congestion is self regulating: - those who place a high value on making their journey at peak times will be prepared to pay the waiting costs and will travel at those times. Others, will value peak-time travel less; will only drive at off-peak times when the waiting costs are less. The problem of road congestion is therefore self-equilibrating and does not warrant economic intervention." Discuss and explain this statement. Do you agree with it? What type of economic interventions might the statement be referring to and why might such interventions be justified in strict economic terms?
             Road congestion has become one of the most demanding problems in metropolitan areas; this is mainly due to the ever-increasing levels of car ownership and relatively slow expansion of road infrastructure. At the same time as experiencing congestion, road users are also creating it, however, in deciding when to travel few people take into account the external congestion costs their trips impose on others. During this essay I am going to be discussing the various externalities of road travel and the possible economic interventions that could help to reduce road congestion.
             In order to explain the externalities experienced in road congestion I am going to use the diagram below.
             Figure A shows the effect of congestion between two points on a public road. The two demand curves show the demand for drivers at off peak hours and the demand for driver at peak hours. Both demand curves are negatively sloped, meaning that as the time spent driving increases, the demand for driving decreases. The diagram also shows two cost curves, MC the marginal cost of travel and AC the average time cost of travel. At the low volumes of traffic MC=AC, this is due to the addition of one more car having no effect on the congestion of the road at off peak times. MC and AC start to rise due to the increasing traffic volume, meaning that the additio...