According to Forbes new, Indian’s Government recently enacted legislation that allows major cities to arbitrarily set limits how much ride service companies such as Uber can charge riders during peak times. As a customer of Uber, I experienced how high the price can be at peak time once it cost me eighty dollar just to take a 30 minutes drive from school to home. So Basically Indian Government is setting a price ceiling that make the customers don’t have to spend that much of money even at the peak hours. However Is this action made by indian government really a great thing to the whole economy?
According to the supply-demand economy, when the demand of uber goes up, the price should also go up to finally come to a equilibrium between the customer and producer. However, if the government set a price ceiling during the peak hours of the day that means the price will never come to a equilibrium but will result in demand surpasses the supply of the uber, which means that some people wouldn’t able to catch a ride during the peak hours. The only great thing about the peak hour price boost is that it keep the supply enough for the customers that require to take a uber at that time, when people who don’t really has to take a uber see the price, they will wait for the peak hour to pass away, but if the government set a price ceiling on that, many people who don’t really have to take a uber at that time will also call a uber, just to convenience them self which can be seen as a tragedy of commons where people take what they can take without regarding to other people’s need; However, as they take the uber those who really need to catch a uber will not be able to get one. According to the analyzation above we can conclude that with higher demand than supply of the uber it comes to a shortage, resulting in longer wait time and loss of those people that has to take a uber during that time.
However I think it’s not always a bad idea for the government to set a price ceiling to uber peak hour cost, the only problem to me is that the news says major cities can ARBITRARILY set limits, no matter where the government set the price ceiling as long as it’s lower than the equilibrium price it will always cause a shortage so if the government can set a price ceiling above the equilibrium, for example for a ride from school to home, make a fifty dollar price ceiling at peak hour, that will drive those people who don’t have to take the uber away but still make it affordable for people that has to take a uber. Wrong setting of a price ceiling could make a mess to the economy.
21st Century Citizenship 