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# Evaluate the likely microeconomic effects of building major infrastructure projects
- URL: https://www.a-level-economics-tutor.com/evaluate-the-likely-microeconomic-effects-of-building-major-infrastructure-projects/
- Published: 2026-10-20T12:28:44.000Z
- Updated: 2026-10-20T12:28:44.000Z
- Author: Jaisul Naik
- Tags: Edexcel 25 Mark Question

### Edexcel A-Level Economics 25 Mark Question

High Speed 2 (HS2) was a £100 billion UK government rail project designed to expand the existing network. The journey time between London and Manchester would take just 1 hour and 11 minutes, 54 minutes quicker than today’s fastest time. Almost 900 homes, 1000 businesses and around 60 ancient woodlands would be destroyed by its construction. 

**Evaluate the likely microeconomic effects of building major infrastructure projects.** (June 2025)

**Plan**

- **Paragraph 1**
  - **Argument: one microeconomic effect of these infrastructure projects is negative externalities e.g. 60 ancient woodlands damaged**
  - **Diagram: negative externalities diagram**
  - **Evaluation: however, there are also positive externalities from these infrastructure projects e.g. less road pollution**
- **Paragraph 2**
  - **Argument: another microeconomic effect of such infrastructure projects is an increase in geographical mobility of labour**
  - **Diagram: increase in the supply of labour**
  - **Evaluation:**

One microeconomic effect of infrastructure projects such as HS2 is negative externalities. Negative externalities are the negative impact on a third party from a transaction. The third party refers to someone apart from the buyer or the seller, and the diagram below shows that goods or services with negative externalities are overproduced. The diagram shows that the output in this market is at Q1, which is where MPC equals MPB, and this maximises the utility of the buyer and the seller. The buyer and the seller ignore any effects on the third party. In this case, the project leads to damage to local businesses and homes, as well as ancient woodlands, causing harm to people outside of the market. These effects get ignored by the buyers and sellers, but if they were accounted for, then the optimal output in this market would be at Q\*, which is where marginal social cost equals marginal social benefit. The diagram shows an overproduction of these projects.

![](https://storage.ghost.io/c/c4/66/c466eade-2ad5-4613-8010-7a8ffa8c352f/content/images/2026/10/image-7.png)

However, there are also positive externalities associated with these infrastructure projects. The text mentions that the journey time between London and Manchester will be reduced. This will have a positive effect on society as the train journey becomes much more convenient. There will be a fall in the number of people who are using a car to travel from between London and Manchester. This is because a train is a close substitute for a car, and as a result, there will be a decrease in the number of people relying on a car to travel from London to Manchester. This means that there will be less carbon emissions from these journeys, and therefore, this will benefit other people in society as they get to enjoy cleaner air. 

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