Government Deregulation on The Taxi Industry Essay

597 Words 3 Pages
Recently in Auckland there has been outrage at the high prices of taxi fares. The last significant change to the taxi industry was caused by government deregulation, in 1989. This economic inquiry report is going to investigate the impact of this government policy, and the unintended consequences for both consumers and taxi drivers.
Deregulation decreased the barriers to entry for people wanting to become taxi drivers. This is due to a removal of a restriction on the number of taxis operating in specific areas, thus anyone can become licensed. Only basic requirements, such as passenger safety, and testing metering, equipment exist (Gaunt, 1996). The effect of this has been a dramatic increase in the number of drivers not only in Auckland, as it is relatively easy to enter the industry. For example by 1994 in Auckland there had been a 67% increase in the number of taxi companies (Morrison, 1997). It is evident that the quantity of taxis available (supplied) has increased, due to reduced barriers to entry; suggesting that the taxi market should be competitive.
The demand for taxis is likely to have increased as the population of Auckland has increased; from 943,776 people in the 1991 census (Statistics New Zealand, 1997) to 1,415,550 in the 2013 census (Statistics New Zealand, 2013). Consequently there should be more people requiring a taxi service.
The effect of deregulation on supply should have provided customers with…