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Marginal Social Cost Analysis

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In a basic principle of efficient road user charging the user must be charged for all the additional costs, because they imposed by their used of the road system. Marginal external cost is an additional cost while marginal social cost are cost its borne directly by the user. This principle that all costs are valued at the compensation that needed to those willing to do.
They have two main constraints in the development of road user charging the technical and economic. Charging has two form the Fuel duty and Vehicle excise duty.
Efficient prices (MSC- MARGINAL SOCIAL COST CONCEPT). Have two concepts: SHORT RUN which pricing translates into, in terms of road pricing, is a need to measure three components of cost. The first is the cost imposed …show more content…
The absolute size of the elasticity conveys information on the sensitivity of demand to changes in the factor affecting demand and its sign conveys information on the direction of the change. A wide range of factors influence the size of elasticity’s, such as current cost levels, the availability of alternatives, and the size of the change in costs and income levels. While these factors can be discussed in isolation it is likely that more than one of them will exert an influence at the same time. There is also a need to consider the dynamics of the impact of costs upon demand. An increase in costs would result in a reduction of traffic thus reducing the congestion costs experienced by the remaining travelers and so reducing their journey times. At the margin this journey time reduction may well allow some drivers To re-enter the road system for which the total journey costs is now less than the benefit they gain from travelling. Whereby the total costs of travel equals the total benefits gained from …show more content…
Society is always involved this matter and every single that we do and use of we need to analyzing all because the marginal cost analysis provides contrasting results with marginal cost exceed revenue. Both approaches have their advantages and disadvantages but they have two situations where have a choice between the two need not be made like the infrastructure provision happens to be optimal the short – run and long - run marginal cost will be identical but on the other hand the circumstances of infrastructure can be assumed to be fixed for the foreseeable . Equilibrium always exists in economy with non-convex productions sets. The economic environment this situation analyzes is one in which firms with non – convex production perhaps as result of regulations follow the pricing rules which do not necessarily guarantee maximum profits. Even though like that if the firm or government agency is focus on the accessibility of the user I would more benefit because the economy is not constant, there is a possibility it would be up and it can make more enough income for the economy. Reality we are live in a business world, the most important is that the goodness and benefits as a whole of the society not only the revenue. For example, In the Philippines the MRT train it should be better to buy

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