In the Netherlands in 2018, there were $$\(1.3\)$$ bicycles per person and the world's largest underground bicycle parking area was built in the capital city. Land is scarce in city centres, where most cycling takes place. Demand for bikes in the Netherlands is price-inelastic. Only a few people in the Netherlands borrow money to buy bikes. The government encourages cycling by spending on both bike parking areas and leisure cycle parks. Discuss whether or not a government should encourage more people to cycle.
Exam No:0455_m21_qp_22 Year:2021 Question No:3(d)
Answer:
Knowledge points:
2.10.1 definition of market failure :The key terms associated with market failure: public good, merit good, demerit good, social benefits, external benefits, private benefits, social costs, external costs, private costs.
2.11.2 government intervention to address market failure
Solution:
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