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1.8 The market mechanism, market failure and government intervention in markets

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Question 109

Extract A: The urban transport transition

Sales of electric cargo bikes and e-scooters in major cities have surged, with European sales climbing from 230,000 in 2019 to an estimated 1.45 million in 2023. These micro-mobility options present a clean alternative to diesel and petrol cars, which generate significant external costs via road damage, carbon emissions, and micro-particle air pollution. Currently, micro-mobility accounts for under 2% of total city commutes, but urban planning forecasts predict this share will rise to 15% by 2030. In response, city councils are investing billions in dedicated, segregated cycle lanes, while several metropolitan authorities have proposed complete bans on fossil-fueled vehicles in central districts by 2032.

However, implementing these changes is challenging. Establishing comprehensive, safe active travel networks requires significant municipal borrowing and public spending. Furthermore, many commuters still choose traditional private cars due to perceived convenience and comfort, despite high fuel taxes. To accelerate the shift, some local governments are offering direct cash incentives and tax-free purchase schemes for electric bikes.

Yet, even zero-emission vehicles contribute to urban congestion, noise, and microplastic pollution from tire wear. Critics argue that instead of subsidising specific new transport technologies, all urban motorists should face road-pricing schemes—such as pay-per-mile charging—that reflect the true social cost of road space and pollution. This would directly incentivise a shift towards walking, cycling, or public transport.

Source: Allied Urban Transit Research, 2024


Extract A states that "all urban motorists should face road-pricing schemes—such as pay-per-mile charging—that reflect the true social cost of road space and pollution. This would directly incentivise a shift towards walking, cycling, or public transport."

Evaluate policies that could be used to reduce the environmental and congestion impacts of private car use in urban areas.

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Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.

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