Traffic congestion is a problem in many cities. Among the possible ways of reducing congestion are allocating more resources to building roads, taxing petrol and subsidizing bus travel.

Describe how resources are allocated in a market economy.

Explain why the social costs of car use are greater than the private costs.

Using the principles of demand and supply, describe the effect of a tax on petrol on

the market for petrol.

Discuss whether bus travel should be subsidized by the government.