Managerial Economics: Allocation of Resources, Social Cost of Cars, Tax on Petrol, Subsidies for Bus Travel

Managerial Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
TASK 1............................................................................................................................................1
Way of allocating resources in a market economy......................................................................1
Reason behind cause of greater social cost of car than private cost............................................2
Effect of a tax on petrol on market for petrol..............................................................................3
Discussion on whether bus travel need to be subsidised by government....................................4
TASK 2............................................................................................................................................5
Argument on declination of luxury cars with decreasing its price, as per law of demand..........5
TASK 3............................................................................................................................................6
Evaluation on a large country which is more open for adopting flexible exchange rate as
compared with small nation.........................................................................................................6
TASK 4............................................................................................................................................7
Explanation of demand terms and concepts................................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Managerial economics considers as one of the main theory which includes business
practices, to make effective decisions and future planning. It helps management of a firm to
formulate logical decisions relating to internal functions and solve practical problems, by using
analytical and statistical tools (Wang and Wu, 2020). A report is made under present assignment
on traffic congestion, which is one of the main problem of various cities. To resolve this
transportation issue, a key discussion is done on way to allocate resources to taxing petrol,
building roads and subsidising the bus travel. Along with this, some arguments make on demand
of declination of luxury cars, adoption of flexibility of exchange rates, with explanation of
demand terms and concepts.
MAIN BODY
TASK 1
Way of allocating resources in a market economy
Rising peak-hour traffic congestion is one of the inescapable problem in growing
metropolitan areas and large cities. It an inherent result of manner, in which modern cities are
operated (Nadar and Vijayan, 2020). This condition on transport can be categorised in terms of
slow speed of vehicles due to high traffic, longer times to reach destination and increase
vehicular queueing. Along with this, extreme congestion sets when demand approaches beyond
the capacity of roads, which leads to create frustrations and road rage among drivers. But public
policy makers couldn’t find any specific ways to overcome or reduce traffic congestion.
Therefore, some possible ways that helps in reducing congestion includes allocation of more
resources, for constructing roads, taxing petrol as well as subsidizing bus travel, in following
way –
 As today in urban areas, mostly people avoid to travel from buses, therefore, more
electric buses need to be launches which are equipped with quiet and battery-powered
engines, through which advantage from trams can be diminished (Novack and et. al.,
2019). This would also help in improving public’ perception about buses
 Instead of building new roads, interventions need to be taken for traffic management by
using CCTV cameras for monitoring congestion, enforcing traffic laws, improve bus
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