Land use planning

Question 1

Externalities & market failure

Answer 1

• decisions of individuals impose costs or bestow benefits on others which are not reflected in market prices
  
  • if market prices do not capture all social cost, the supplied quantity exceeds the socially efficient output level
  • if market prices do not capture all social benefits, the supplied quantity falls behind the socially efficient output level

Question 2

Governments’ roles

Answer 2

• Governments can internalise external cost through
  
  • taxation (price-based remedy)
  • regulations (quantity-based remedy)

Question 3

Planning system in the UK

Answer 3

• make decisions about future development and use of land
• decide where development should happen, and how it affects the surroundings
• to regulate the use of land and buildings
• to balance competing demands to make sure land is used and developed in the public’s long-term interest
  => strong policies protecting the countryside and preserving historic nature of urban areas

Question 4

Green belts

Answer 4

a zone of land surrounding an urban area in which urban development is not permitted in any circumstances. In other words, the greenbelt forms a concentric ring around the city which clearly defines the outer edge of the urban area

Question 5

building height restriction

Answer 5

Developers can no longer supply profit maximising buildings
- to cover their total cost, restricted price must exceed free market price