AS ECONOMICS Paper 1 The Operation of Markets and Market Failure, EXAM QUESTIONS AND ANSWERS.

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Context 1 Total for this context: 50 marks BUS TRAVEL Extract A: Take-up of concessionary bus travel schemes for the elderly in England by gender, 2005–2017 Year Male (%) Female (%) 2005 47 58 ... 2007 62 70 2009 71 78 2011 75 81 2013 73 79 2015 72 78 2017 67 71 Note: Concessionary travel schemes involve free or a reduced price of travel Source: National Travel Survey, Department for Transport, updated July 2018 Extract B: Why should the elderly be entitled to free travel on buses? Since 2010, both men and women have been able to apply for a bus pass for free off-peak bus travel when they reach the female State Pension age. By October 2020, this will rise to 66. There used to be regional variations but there is now a national scheme, funded by the UK government. For an annual fee, those over 60 also receive a third off most rail fares. What is the justification for letting elderly people travel on buses for free? Various social, economic and environmental reasons have been given, covering both private and external benefits. As well as the ability to visit friends and family, there is improved access to shops, health care and other vital facilities. Many older people also contribute to the economy through voluntary work or child care, the value of which has been estimated to be £10 billion and £3 billion respectively. There is evidence that without free bus travel, a third of these journeys would be made by car adding to congestion, air pollution and traffic-related accidents. Reduced demand for bus travel could lead to fewer bus services, resulting in less availability for paying customers. Currently, the additional ‘free’ passengers help to spread the fixed costs. It has been claimed that each £1 spent on the scheme generates nearly £3 in benefits. Research also suggests that the benefits go more to those on lower incomes and/or without a car, helping to combat the effects of an inequitable distribution of income and wealth. 1 5 10 15 Source: News reports, December 20183 IB/M/Jun20/7135/1 Turn over ► Extract C: Is continued free bus travel for elderly people justifiable? When the State Pension was introduced in 1948, a 65-year-old could expect to live another 13.5 years. By 2017, this had risen to 22.8 years. Recent figures predict that the number of people over the State Pension age in the UK will grow by a third between 2017 and 2042, from 12.4 million to 16.9 million. Many of these pensioners have reasonable incomes. Bus operators are paid to provide free bus travel on the basis that they are ‘no better and no worse off’ as a result. Government spending on such travel is therefore based on demand. Bus companies also receive subsidies to operate routes in rural areas which would otherwise be unprofitable. However, with the squeeze on public expenditure, funding for these supported services has been cut by 45% since 2010, whilst bus fares have risen by 13% above inflation and over 3000 routes have been cut. With both central and local government looking to make savings of billions of pounds, is free bus travel for the elderly as important, for example, as educating children or emptying bins? Both the take-up rate and number of journeys per bus pass have been falling in recent years, so the free bus pass scheme for the elderly may still be workable. However, as fares continue to rise, along with the number of people eligible for a pass, the basis for the scheme may need rethinking. Perhaps the time has come to stop free bus travel for the elderly or to limit it to certain groups? 1 5 10 15 Source: News reports, December 201 [Show More]

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