However the true cost of road transportation is hard to quantify as there are many external costs not considered by an individual when calculating the marginal cost and benefit ratio before undertaking a journey (Parkin. 2000). These externalities include the cost of congestion, especially during peak periods adding to the cost of fuel and time to the journey, air pollution and its resulting effects upon both human health and the environment, noise pollution effecting property value in areas surrounding busy roads, and the costs of traffic law enforcement.

In the short term undercharging provides the individual with a benefit, defined as an internal benefit, road transport is cheaper and personal mobility is increased. It can also be argued that it opens up the opportunity of the low-income bracket of a nation's population (in regard to the developed world) to make use of road transport and has a greater benefit to those that use road transport to a greater extent than those who do not. A lower than actual running cost of road transport inevitably increases car sales benefiting the motor industry and the transportation of produced goods within the manufacturing industry. This would therefore increase the demand for road transport, road space and road maintenance, in the short term, as the marginal benefit of making a journey would become greater than the marginal cost of the journey.

Over time it can often be seen that the population can adapt, for example if fuel prices were to increase then in the short term there will be little effect on demand, although in the long term more efficient cars will be developed and the population will find a way to reduce their personal fuel consumption. This would suggest that in the long term the price elasticity of road transport become greater, and has been valued at around 1.5 - 2 (Maddison et al. 1996) becoming more elastic.

It can be seen that undercharging increases the demand for road transport in the short term by providing an internal benefit to road users; in effect it would appear that undercharging encourages car ownership. It does not however provide a short-term external benefit to society, but instead further increases the external costs in the long term. A higher number of cars on the road reduces the average speed of travel, causes congestion within urban areas costing an individual both directly and indirectly and is detrimental to the environment inducing a risk to health.

Some topics in this essay:
Griffiths Wall, Barde Button1990, UK USA, road transport, , demand road transport, demand road, short term, car ownership, external costs, private car ownership, cost road, private car, internal benefit, benefit road, price road, benefit road transport, price road transport, internal benefit road,