Should Parking Be Free?   http://flashecon.org/lectures/parking/parking.asp
Demand for parking is represented as a downwardCost per day                                  sloping curve. The driver wit...
When the number of spaces is equal to the number ofCost per day                            cars needing parking and it is ...
When the number of spaces is fewer than the number                            of drivers looking for parking, the consumer...
If the spaces are reduced by 50%, the utility is also                            reduced by 50%. If parking is kept free, ...
If a fee of $5 per day is charged for parking, the number                                  of spaces demanded is equal to ...
For the drivers who would be willing to                                                    pay $10 / day, there is a consu...
When we compare the benefit of free                                       parking to the benefit of paid parking, the     ...
• When spaces are scarce, free parking is inefficientCost per day       • The total benefit under paid parking is larger t...
For more information• Visit FlashEcon.org• http://flashecon.org/lectures/parking/parking  .aspThis work is licensed under ...
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Should Parking Be Free?

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Everybody loves free parking, but when the number of parking spaces is fewer than the number of drivers wanting to park, free parking will squeeze out the drivers with more urgent needs.

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  • Everybody loves free parking, but when the number of parking spaces is fewer than the number of drivers wanting to park, free parking will squeeze out the drivers with more urgent needs.
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • http://flashecon.org/lectures/parking/parking.asp
  • Should Parking Be Free?

    1. 1. Should Parking Be Free? http://flashecon.org/lectures/parking/parking.asp
    2. 2. Demand for parking is represented as a downwardCost per day sloping curve. The driver with the most urgent need is prepared to pay $10 / day, while the driver with the least urgent need will only park for free. $10 $5 Demand for parking Paid benefit 0 50 100 Parking spaces
    3. 3. When the number of spaces is equal to the number ofCost per day cars needing parking and it is free, it will result in maximum utility, or utility that is not paid for when parking is free. $10 $5 Consumer surplus Demand for parking 0 50 100 Parking spaces
    4. 4. When the number of spaces is fewer than the number of drivers looking for parking, the consumer surplus isCost per day reduced by the uncertainty of not finding a space. $10 $5 Demand for parking Consumer surplus 0 50 100 Parking spaces
    5. 5. If the spaces are reduced by 50%, the utility is also reduced by 50%. If parking is kept free, and spaces are still in high demand, the consumer surplus is reduced,Cost per day and its distribution may also be insensitive to the differing needs of drivers. Drivers with less urgent needs will remain in spaces that drivers with urgent needs $10 would be willing to pay for. Time spent searching for parking is a dead weight loss to the economy. $5 Demand for parking Consumer surplus 0 50 100 Parking spaces
    6. 6. If a fee of $5 per day is charged for parking, the number of spaces demanded is equal to the number of spaces available. Nobody who is prepared to pay $5 is denied aCost per day space, eliminating the need to search for parking, and those who are not prepared to pay $5 will look for alternatives. $10 $5 Paid benefit 0 50 100 Parking spaces
    7. 7. For the drivers who would be willing to pay $10 / day, there is a consumer surplus that they benefit from. The blueCost per day area represents the paid benefit received Consumer by drivers and the collected revenue for surplus the parking lot owner. $10 under paid parking $5 Paid benefit 0 50 100 Parking spaces
    8. 8. When we compare the benefit of free parking to the benefit of paid parking, the blue area (paid benefit) alone is equal toCost per day the benefits of free parking. $10 $5 Paid benefit 0 50 100 Parking spaces
    9. 9. • When spaces are scarce, free parking is inefficientCost per day • The total benefit under paid parking is larger than under free parking $10 Consumer surplus under paid parking $5 Paid benefit 0 50 100 Parking spaces
    10. 10. For more information• Visit FlashEcon.org• http://flashecon.org/lectures/parking/parking .aspThis work is licensed under a Creative Commons Attribution-Share Alike 2.5 License.

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