South-Western EconNews

You Really Gotta Love Driving to go on these Roads

Subject

High Toll Costs Prevent Consumption

Topic

Economics and the Environment; Government and the Economy

Key Words

Illegal Immigration, Labor Market, Poverty, Hispanics, Regulation

News Story

The Japanese government has imposed extreme tolls to use Japan's extensive highway and bridge system. Done originally to pay for the construction of the roads, the government now uses the income to pay down the government debt from public-works projects. In fact, driving the length of Japan, which is about the size of California, would cost approximately $330 in tolls.

Having to pay the tolls leads some drivers to avoidance behavior. Some drivers have increased the numbers of people in their car to help share the cost of the tolls; others have resorted to planning extensive and more time-consuming routes; still others have resorted to boycotting, or even traveling by plane from one city to another.

(Updated October, 2003)

Questions

1.	The significant amount of avoidance that Japanese drivers exhibit implies what about the relative elasticity of demand for Japan's highway system? Why?
2.	What would happen to Japan's tax revenues if it decides to reduce the cost of the tolls?
3.	The fact that Japan imposed a toll was done for what specific reason? Was this efficient? Does it still collect the toll for the same reason now?
4.	How does this article illustrate the concept of opportunity cost?

Source

Jason Singer, "Lonesome Highways: Japan's Hefty Tolls Drive Cars Away." The Wall Street Journal. 15 September 2003.