Microeconomics, Demand and Supply

1.0 ARTICLE SUMMARY

The article is taken from Straits Times newspaper which entitled “Higher Taxi Fares Shorten Wait for Those Willing to Pay” posted on 13 December 2011. The article reports about the increase of taxi fares in Singapore which results in the decreasing number of taxi passengers and taxi drivers’ earnings.

2.0 INTRODUCTION

Taxi fares in Singapore are increasing since 12 December 2011. Many issues had happened due to this phenomenon and many people were disappointed as a result. However, some people were happy with the increase in taxi fares as the waiting time for taxi has cut down.

Lately, many articles in the newspapers are reporting about this case and have even become the headline issue. Hence, this report will examine the demand and shortage, supply, price floor, market efficiency and elasticity. In conclusion, factors which are related to the rise in taxi fares will be discussed specifically.

3.0 ANALYSIS

3.1 DEMAND & SHORTAGE

According to Economic Glossary, demand is “the want or desire to possess a good or service with the necessary goods, services, or financial instruments necessary to make a legal transaction for those goods or services” (Moffat 2011).

From related article entitled “ComfortDelGro Revises Taxi Fares”, there are two reasons why ComfortDelGro –which will be followed by other companies-, increases the taxi fares. The company and National Taxi Association convinced that the revised of taxi fares was meant to reach high demand throughout the day and balance the high operating cost in recent years.

One of the reasons why demand of taxi is very high is because commuters are constantly looking for comfort on every journey. There are many other public transports offered, but the comfort provided by taxi is different from both bus and MRT. Moreover, taxi takes a shorter time to travel compared to other public transports. For that reason, the demand of taxi remains very high and results in a shift of demand curve to...