ASSIGNMENT 1

A. Should the government subsidize public transport? Justify your answer.

There are lots of compelling reasons for subsidizing public transport. Subsidizing
Public transport has been shown to increase ridership, which in turn increases the
frequency of the entire system and reduces waiting times for all users. Public
transport subsidies is also a good solution for urban transport problem caused by
cars such as Noise and Air pollution, Difficulties to have parking slot, Traffic
jam and congestion, Fatalities and many more.

Global warming is a serious issue and if public transport is subsidized, more people
would use it, taking cars off the road. A public transport system with 20 trains could
take 40,000 cars off the road [1]. In the US, it shows that adding two new lanes on
highways can only provide short term solution for congestion problem, but it doesn’t
have any positive effect on pollution and environmental problems [2]. If public
transportation is subsidized then more cars will be taken away from the traffic, the
less pollution and less accident will be caused. Also subsidizing Public transport
system benefit lower-income individuals.

However, problems can arise when subsidies are not properly applied. If subsidizing
Public transport system does not improve the quality of service or fail to help those
in need, they lose their impact. Initiatives to subsidize public transport facilities
should be in a sensible and balanced manner.

In a developing country like India, it is necessary to find alternative funding sources

to balance for the subsidiaries provided. For example, one logical option is to
subsidize student fares with education funds, because access to education is
connected to the availability and quality of urban transport. Similarly, subsidies for
low-income communities, older adults, and users with disabilities can come from
the budget for social services. Alternatively, funding could come from taxes on
inefficient car use, since private vehicles often do not pay for the full amount of
their social cost—which includes traffic congestion, air pollution, and crashes. All
these sources of funding can help ease the financial burden on transport budgets.
2. Should the government operate public transport system? Justify your answer.

3. Earlier
it was common to assume that people valued travel
time at their hourly wage rate, at least during the journey-
to-work. Under what conditions would this assumption be
valid? Which of these conditions do not hold for most
commuters?

References
1. https://efficientgov.com/blog/2015/07/08/pros-cons-making-public-
transportation-free/
2. https://www.ukessays.com/essays/economics/advantages-of-government-
subsidies-to-consumers-economics-essay.php
3.