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CNN: Luxembourg makes all public transport free

Article published: March 2, 2020

IB Economics syllabus: Microeconomics (positive externality of consumption, government intervention)

This article talks about public transport becoming completely free in all of Luxembourg. This is because the richest country of the EU can afford to absorb the costs of public transport as they believe that the benefits to the population outweigh the costs. Thus, as public transportation can be considered a merit good, the government provision should boost consumption, reducing the market failure. You can also talk about car consumption leading to negative externalities such as congestion and that this policy should solve this problem. Also, make sure you evaluate the policy and don’t forget to talk about possible disadvantages.

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