Sunday, September 30, 2012

Public transportation: Can you locate the driver?

Good morning economists and have a great week. Today I would like to discuss the rising prices for gas (petrol). Specifically, one of the Troika measures for European countries is the increase in tax for petrol. This will have two main impacts.

The first, is that we will most probably witness a rise in the general level of prices because petrol is used for the production of the majority of goods and services. As such any tax rise will be transmitted from the supplier to the consumer.

Secondly is the substitution effect from private vehicles to public transportation. More people will be using buses, the metro (where that is applicable). My question, however, is that given the poor economic state of the majority of governments around the world and the public spending cutbacks that need to be enforced, how many bus drivers will be left to provide this service?

 Given that he must have an unobstructed view of the road, can you locate the driver? Have a nice day!


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