Monday, December 29, 2008

Drop in Demand = Raise Price?

If you don't see anything wrong with the title of this post, I think you are qualified to work somewhere in government.

According to this article, traffic in the express lanes of the I-25 toll road around Denver has fallen over the last year. So, what's the government doing? Raising the fee for the express lane, of course. Maybe we should appoint a toll czar!

Note: the increase in the toll is because of an agreement that the tolls can't be lower than express service rates on buses, and the bus rates are going up. The astute among you might wonder why road tolls are linked to bus rates - I have no idea, but I definitely think we should get government more involved in private business!


  1. This is as good as some government's response to recent drought conditions.

    Both North Carolina and Georgia recently experienced serious drought conditions (part of NC is still doing so). The state responded not by increasing the price of water as the supply fell, but instead by imploring people to conserve water.

    This worked very well; so well in fact that the water authorities argued after the drought conditions eased that they had not brought in enough revenue to cover their fixed costs. Now that the drought was over due to the increase in the supply of water, they requested a rate increase in order to make up the lost revenue due to the decreased demand during the drought.

  2. I'm guessing it's because buses and cars are substitutes. If the price of taking the bus increases relative to the price of driving, more people will drive. The microeconomist's answer would be to increase the cost of driving by internalizing driving's many externalities, but I think more fully subsidizing public transit is easier. Regardless, it's politics.

  3. It is obviously very simple logic, if the demand is less than the price is easily going to grow, so as a Forex trader, I need to be always aware of things to get success and I am luckily able to do it without any major trouble at all and this is all to do with OctaFX broker for providing me mind blowing news and analysis which I am able to follow easily, so that’s why I am able to work well and that always lead into fairy tale results for me.