1.   Traffic Congestion

     If a city council faces severe problems with traffic
congestion, a knowledge will benefit all parties. It is this I will
debate in the lines to come.
     When traffic is a problem in a city, all sorts of means of
transportation can be included, but it is mainly cars which seem to
be the problem. Therefor raising gasolin prices (by putting an
extra tax on them) should instinctively reduce car usage, seeing
that costs for the driver would go up. This is though only the
case, if demand for gasolin is inelastic (fig. 1). Here a tax on
gasoling has moved the supply curve to S2 and the price to P2,
which has lead the quantity demanded from Q to Q2. The difference
between Q and Q2 is the essential of the diagram, and it is clear
that there has only been a very little decrease in quantity
demanded. On fig. 2 demand is elastic, and again a tax on gasolin
has been introduced, moving the supply curve to S2 and incresing
the price to P2, which then has decreased the quantity demanded to
Q2. Here the difference on quantity is great.
     It is now easy to conclude that if demand for gasolin is
inelastic, almost the same will be bought, and there will be hardly
any decrease in traffic congestion. If demand is elastic, quantity
demanded will go down and so will caruse in general leading to a
fall in traffic congestion in the city centre.

3.   Gondomar and Bayona

     If maximum growth rate is a desired goal, the proportion a
country spends on consumer goods or investment is highly relevant.
In the following I will outline the differences between the two
countries Bayona and Gondomar.
     Gondomar has chosen to have a high proportion of its N.I.
spend on investment. If this investment goes into factories and
businesses, the investment could turn out to benefit Gondomar in a
very positive way. N.I. will go up, and therefor the average GDP pr
head will go up as well. This leads to better standard of living.
Drawbacks which must also be kept in mind is worsening of nature,
pollution, and other external social costs the society will have to
live under.
     Bayonas approach is much more passive, in the sense that she
does not strive to achieve growth in the same way as Gondomar. The
spending on money here is mainly spend on consumption, which means
the economy is more focused on import. If relatively is being
produced, N.I. will go down and standards of living will go with
it. 
     Overall it is clear that a policy which focuses on investment
rather than consumption, is more likely to benefit on long
terms.    



4.   National Income

     Several problems occur when trying to meassure national
income. Even if  many factors have to be considered before arriving
at a result.
     The first problem which comes to mind, when considering
problems, is the fact that the data collected could easily be
unexact. For example is there a very large informal sector in many
underdevoped countries. This informal sector includes everything
from theft to prostetution. All of this activity is very difficult
to anthing but an estimate of. The informal sector does not include
farmers providing for themselves, but this is also unrecorded, and
should not be left out, when calculating N.I. Meassuring bread
which is sold, is realtively easy, while services and certain
commodities, usually within the public sector, do not have a price.
Here productivity will tend more to an estimate, than an excact
value, when adding this number up to N.I. 
Finnally when the N.I. has been added up, there is a final problem.
N.I. is usually only helpful when used to compare with other
countries economy, and therefor the various N.I.'s have to be
exchanged on paper to a common currency (usually the dollar) for
better comparison. Here the value of N.I. will natuurally vary
according to the exchange rate, and not the productivity.
     Concludingly, it should be stated that all of the above
vritirias should be met when calculating N.I. if a correct figure
is desired.

