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

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Question 6

Extract C: Passenger rail travel in Country X: indices of passenger journeys and passenger-kilometres, 2012–2019 (2012=100)

YearIndex of passenger journeysIndex of passenger-kilometres
2012100100
2013102101
2014105106
2015109111
2016114115
2017118119
2018121122
2019120121

Extract D: Consolidation and Ownership in the Passenger Rail Sector

In November 2021, two major regional train operating companies, Trans-Midlands and Central Rail, announced plans to coordinate operations under a joint venture to streamline services between major industrial hubs. Supporters argued that this integration would reduce administrative duplication, improve coordinating schedules, and offer a more seamless journey for commuters. However, consumer groups expressed concern that this move would reduce competition on key overlapping routes, leaving commuters with limited alternatives and higher fares.

This consolidation occurs amidst growing calls for a return to public ownership of the rail network. Proponents of nationalisation point to the frequent service disruptions, complex ticketing systems, and high dividend payouts to private shareholders. On the other hand, critics argue that state control could lead to operational inefficiencies and a lack of market-driven innovation, suggesting instead that regulated private franchises remains the most efficient model.

Explain the term 'public ownership' (Extract D) and analyse two economic reasons that could be used to support public ownership of industries such as passenger rail transport.

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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