Traffic Congestion Costs: Understanding External Costs

This lecture delves into the concept of traffic congestion costs, analyzing how the time needed to travel from point A to point B increases as the number of vehicles on the road surpasses capacity. The instructor explains the difference between the time cost of congestion and external costs, highlighting the impact of congestion on commuters and society. By examining the optimal traffic flow and the welfare cost of excess traffic, the lecture emphasizes the importance of considering both the negative and positive effects of congestion when evaluating its economic implications.