Parking Management, Production Frontier & Long-Term Economic Growth

This essay explores several key economic concepts. It begins by analyzing the shift from free parking to restricted parking in Australian cities, attributing the change to increased demand and limited supply. It then uses the Production Possibility Frontier (PPF) model to illustrate the trade-off between current and future output, focusing on the Australian government's policy of encouraging higher education. The essay further discusses the long-term determinants of economic growth, including physical capital, human capital, technological knowledge, and government policies like fiscal and monetary measures. Finally, it examines the relationship between investment and standard of living, acknowledging that while investment can enhance economic growth and reduce unemployment, it may also exacerbate income inequality. Desklib offers a wealth of resources, including past papers and solved assignments, to aid students in their academic pursuits.

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Course ID

1
ECONOMICS
Table of Contents
Question 1..................................................................................................................................2
Question a...............................................................................................................................2
Question b..............................................................................................................................3
Question 2..................................................................................................................................5
Question a...............................................................................................................................5
Question b..............................................................................................................................7
References................................................................................................................................10

2
ECONOMICS
Question 1
Question a
Demand and supply of a product determines price in the market. With least demand
and plenty of supply a good can be available in free. With increase in demand pressure
supply contracts and price increases. This is what happens to the parking management in
Australian cities. Fifty years back, because of plenty of availability of parking space there
were no fees applicable for parking. The situation however has changed now. With growing
industrialization and urbanization, demand for land increase leaving fewer space available for
parking. There is also an increasing trend in the per capita car use. Since 2004, cities of
Australia have experienced a considerable improvement in sustainable and active
transportation modes. There is a growing figure for public transport patronage in each of the
capital cities (foreground.com.au 2018). This though indicates a decline in car dependency
among the residents, the availability of parking space still remains a problem. There is a
gradual increase in total kilometres travelled in different. The share of motorized passengers
kilometres has remained stable. The past few decades have experienced a remarkable
increase in car ownership. The demographic trend and increasing wealth contribute the
current trend in vehicle market.
In contrast to growing demand the supply of car parking spaces in capital cities are
very limited. There are relatively lesser developments of parking bays within residential
buildings and offices. There are in fact demolition of parking lots in order to develop more
office building and residential construction. Consequently, the demand for parking lot
exceeds the supply. Demand is particularly rising in CBD locations
(commercialrealestate.com.au 2018). As no new car parking lots are developed demand
typically exceeds the supply.

3
ECONOMICS
The shortage of car parking areas creates an upward pressure on price of car parking
areas. There are three main approaches used for parking management in Australia. The three
measures include conventional, responsive approach and parking management. The
conventional parking approach has mainly been used in many of the western cities. It refers
to enforcement of minimum parking requirement. Under parking management approach tools
such as permits, pricing and time limits are used to balance demand and supply
(foreground.com.au 2018). Responsive approach refers to the policy of imposing price of
parking to capture the demand more accurately.
With the objective of limiting the use of car parking areas heave prices have been
charged for valuable car parking space. The cost of parking even exceeds $80 per day in
some regions. The expenses are especially higher for the commutators living or working in
areas with little convenience of public transport. City centers tend to bear extremely high
pressure of parking price (Gotley 2018). The parking meters are also increasing for airport
areas, in shopping centers and other areas where parking where free of cost previously.
Parking prices are larger in capital cities with cist being highest in Sydney and Melbourne.
The rate of parking meters varies depending on location and time. 8 am to 6pm Monday to
Friday are considered as peak hours (cityofsydney.nsw.gov.au 2018). All other times are
regarded as off –peak. The parking rate in Sunday is applicable on all the public holidays.
Question b
Production Possibility Frontier is the frontier of efficient production. It shows different
attainable combination of two goods that can an economy is able to produce by fully utilizing
all of its resources. The most important implication of production possibility frontier is that it
indicates the trade-off involves in economic decision (Baumol and Blinder 2015). Most vital
problem of an economy is the scarcity of resources and associated trade off. Economic

4
ECONOMICS
resources are scarce in the sense that an economy has limited resources to fulfill the unlimited
wants of people. To increase production of one goods an economy therefore needs to
sacrifice output of some available alternatives. This gives rise to the concept of opportunity
cost. The opportunity cost is the implicit cost of any decision and estimates cost of sacrificing
the next best alternative for making current decision. Opportunity cost is the forgone utility
that would be enjoyed otherwise in the decision making process. An economy also faces
similar trade-off while allocating resources between current and future production (Sloman
and Jones 2017). Allocating more resources for production in current years means less
resources are available for future production. The higher output today thus implies a lower
possible output for future given resources remain fixed. The current policy assertion of
Australian government is an application of this concept.
The Australian government has recently taken initiatives to encourage young people
to attend universities. This is expected to increase proportion of educated youth workforce.
Educated youth workforce means a more efficient and more skilled labor force for future. A
skilled and educated workforce means a larger output per unit of workers. This will definitely
ensure a higher output in future for Australian economy. The decision to pursue higher
degree course in universities however necessarily has an opportunity cost (Hill and Schiller
2015). This prevent youth to join workforce who would have otherwise joined the labor force
after completing their high school studies. If they join the labor force immediate after their
high school, then this increases current strength of labor market. The increased supply of
labor today would then increase current output for Australian economy. It is certain that
higher universities degree will increase skills of when these young people complete their
study and eventually enter the labor market (Cowell 2018). the opportunity cost of higher
output in future is the forgone output at present. This is explained with the model of
production possibility frontier given below.

5
ECONOMICS
Figure 1: Production Possibility Frontier
(as created by Author)
The above figure captures the opportunity cost of future production in terms of
forgone production in current year. The current production is measured in the horizontal axis.
The vertical axis measures the future production of Australia. When more young people join
universities to pursue higher studies then this reduces current production from X1 to X2. The
increased skill of youth people from higher studies is likely to increase future output from Y1
to Y2. The undertaken policy of Australian government thus increases future output of
Australian economy at the cost of lower output at present.
Question 2
Question a
Determinants of long term economic growth
Economic growth implies an overtime increase in market value of products and
services that is produced in an economy. It is generally measured through the percentage
change in real gross domestic product of a nation. The long term economic growth is
described as a sustained increase in output of produced goods and services. GDP growth of a

6
ECONOMICS
nation is integrated with several factors. The various factors influencing long terms growth of
an economy is discussed below.
Physical Capital: Physical capital indicates factories, machineries, computers, transport
equipment and such other. The stock of physical capital helps to expand economic capacity
of producing goods and services. An economy can increase stock of physical capital by
increasing investment. The economic condition necessary for investment is considerable high
share of saving in income. Countries with higher saving are able to make higher investment
and add to physical capital stock (Teixeira and Queiros 2016). Examples of economies
achieving a long term economic growth through their higher saving rate include Asian
countries such as Singapore, Japan and South Korea. Countries like India and Bangladesh in
contrast accounted a slow growth rate because of low saving rate.
Human Capital: Productivity of existing workers can be increase by knowledge earned
through education in schools, different professional courses and job training programs. These
knowledge helps labors to adapt new and innovative technology and effectively operate
equipment. Increase in skills and knowledge of workers is known as human capital. Human
capital plays an important role for long term growth perspective. Increase in human capital
stock through training and education boosts long term economic growth.
Technological knowledge: Technology is the process of using scared input to produce
different goods and services. The adaption of advanced technology could offset the
diminishing return in production and raise economic growth (Malecki 2018). At a given point
of time an economy has fixed technological knowledge. By continuously adding to this stock
increases potential productivity of an economy. This in turn results in a sustainable growth of
the economy.

7
ECONOMICS
In addition to these factors, government policy can influence economic growth. Two policies
that government employs to influence economic growth are fiscal policy and monetary
policy.
Fiscal policy: Fiscal policy measures include change in government expenditure and taxes to
alter aggregate demand. The government policy of increase government spending or
declining tax rate is called expansionary fiscal policy (McCombie and Thirlwall 2016). Such
a policy helps to expand aggregate demand and economic growth. In contrast, policy
consisting of a cut in government spending or increase in tax rate is called contractionary
fiscal policy.
Monetary policy: Another channel through which government can influence economic
growth is the money supply and interest rate. In order to expand economic activity, the
central bank expands money supply. The excess supply of money reduces interest rate and
boost investment. This kind of policy is called expansionary monetary policy (Baker, Bloom
and Davis 2016). This leads to economic growth. In contrast, if inflation is too high in the
economy, then government takes tight monetary policy by reducing money supply and
increasing interest rate.
Question b
Investment and Standard of living
Investment refers to the addition to capital stock of an economy. This is an important
component of economic growth. An increase in capital investment means workers now have
more capital to work with. This might result in a higher output per unit of labor. Investment
helps to expands production capacity and enhance economic growth. The expansion of
economic activity followed by increase in investment creates new jobs and employment
opportunities (Agenor and Montiel 2015). The increase in investment thus reduces

8
ECONOMICS
unemployment rate. The lower unemployment rate thus helps to lower poverty in the nation.
The lower unemployment and poverty might contribute to an increase in living standard.
High level of investment contribute to build a good infrastructure which enhances
productivity growth. The increase in economic growth resulted from higher level of
investment lead allows people to afford goods that are necessary for sustaining a good and
healthy life. As suggested by the Harrod-Domar model of economic growth, additional
investment resulted from higher saving leads to an increase in real GDP that supports a
higher income and consumption (Mankiw 2014). This indicates a higher standard of living.
Investment though can improve standard of living through enhancing economic
growth it cannot cover all aspect of standard of living. An increase in volume of investment
though increase economic growth and reduces absolute it might increase inequality in income
distribution in terms of increasing relative poverty (Uribe and Schmitt-Grohe 2017). This is
because the benefits from higher investment is mostly limited to wealthy class of people in
the society. One example of this is China. In the last 25 years, China has achieved a faster
economic growth through high volume of domestic and foreign investment. This though
successfully increase per capita GDP from $980 to $14239 between the period 1990 and
2015, there is however an increase in Gini index of income inequality from 0.3 to 0.53 over
the same range (Agenor and Montiel 2015). A nation cannot have a higher standard of living
in the presence of rising inequality. The larger regional and gender inequality might also
increases hampering the living standard.
Higher investment does not necessarily improve social indicators of well-being. The
argument is similar to that of evaluation of economic growth as a measure of economic well-
being. Investment in pollution intensive industries aggravates the problem of pollution.
Pollution has serious adverse consequence on health. A nation with high pollution cannot
attain a higher living standard. Another social aspect related with high standard of living is

9
ECONOMICS
the crime rate and other social problem (Goodwin et al. 2015). Higher investment does not
reduce the crime or related social problems as the return from investment does not evenly
distribute across all the group. Therefore, focusing only on increasing investment is not a
complete measure for improving standard of living. Investment in the shadow economy not at
all improves living standard rather it understates standard of living. Increase in investment
though is one way to increase standard of living through stimulating economic growth but
there are other qualitative aspects that need to be taken into consideration.

10
ECONOMICS
References
Agenor, P.R. and Montiel, P.J., 2015. Development macroeconomics. Princeton University
Press.
Baker, S.R., Bloom, N. and Davis, S.J., 2016. Measuring economic policy uncertainty. The
Quarterly Journal of Economics, 131(4), pp.1593-1636.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Cityofsydney.nsw.gov.au 2018. Parking meters - City of Sydney. [online]
Cityofsydney.nsw.gov.au. Available at:
https://www.cityofsydney.nsw.gov.au/explore/getting-around/parking/parking-meters
[Accessed 16 Jan. 2019].
Commercialrealestate.com.au 2015. The evolution of car parking – technology creating risk
and opportunity. [online] Commercialrealestate.com.au. Available at:
https://www.commercialrealestate.com.au/news/wp-content/uploads/2015/07/Car-Parking-
White-Paper-2015-1.pdf [Accessed 16 Jan. 2019].
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
foreground.com.au 2018. Car parking is choking our cities, and we’re paying for the
privilege. [online] Foreground. Available at: https://www.foreground.com.au/planning/car-
parking-choking-cities/ [Accessed 16 Jan. 2019].
Goodwin, N., Harris, J.M., Nelson, J.A., Roach, B. and Torras, M., 2015. Macroeconomics in
context. Routledge.

11
ECONOMICS
Gotley, I. 2018. Australian Parking Prices: Which City Pays More? | Canstar. [online]
Canstar. Available at: https://www.canstar.com.au/car-insurance/australian-parking-prices/
[Accessed 16 Jan. 2019].
Hill, C. and Schiller, B., 2015. The Micro Economy Today. McGraw-Hill Higher Education.
Malecki, E.J., 2018. Technological innovation and paths to regional economic growth.
In Growth Policy in the Age of High Technology (pp. 97-126). Routledge.
Mankiw, N.G., 2014. Principles of macroeconomics. Cengage Learning.
McCombie, J. and Thirlwall, A.P., 2016. Economic growth and the balance-of-payments
constraint. Springer.
Sloman, J. and Jones, E., 2017. Essential Economics for Business. Pearson.
Teixeira, A.A. and Queiros, A.S., 2016. Economic growth, human capital and structural
change: A dynamic panel data analysis. Research policy, 45(8), pp.1636-1648.
Uribe, M. and Schmitt-Grohe, S., 2017. Open economy macroeconomics. Princeton
University Press.