Villanueva: Taxi cabs: A need or want

Last March 5, calibration of taxi meters in order to conform with the new approved taxi fares have started. With the new taxi fare matrix, the flag down rate did not change and still remains at P35, but the base rate is already P13.50 per kilometer and the P2 for every minute. This is a drastic increase from the P2 for every 250 meters.

If I were to compute for the additional cost that I would be incurring with this increase considering my daily route from my home to my workplace. I live approximately 4.5 kilometers away from my work place. I pay on the average P79, but with the implementation of this new fare matrix, I would be paying approximately P105, an increase of about P26. This amount seems minimal but I take a cab almost twice daily, and this would definitely hit my budget severely.

This case does not only apply to me. It applies to many people, the riding public. There are thousands of taxi units plying the city’s streets and yet there are time that one cannot hail a cab because all cabs are occupied. This just shows that the demand for this service is high.

Demand as defined in Economics is the willingness and ability to pay for a certain good or service. However, if either willingness or ability is not present, that will not be considered as demand. There may be willingness to ride a cab, but the person has no ability to pay for the cab fare, then it does not constitute demand.

The taxi cab has become the more patronized public utility vehicle in the city. The convenience of a cab just stopping in front of you and can bring you right to your doorstep makes it the more preferred PUV. Unlike the jeepney, where you need to go to the terminal to get a ride, and if your house is not within the jeepney’s route, you would need to walk a little distance.

It is also convenient because one has the elbow room to be comfortable during his ride, without the need to squeeze one’s balls in order for 12 people in a 10-seater jeepney or to share the scarce clean oxygen with 20 other people inside the vehicle.

When riding a cab when I was still in college, I used to feel so rich already because only a few get to ride a taxi, and there were very few times that I took a cab home because it was so expensive then. It was considered a luxury. It was only for the “baknang” or rich. A sudden increase in its price then would definitely cut the number of taxi cab riders significantly, so the taxi cab service was considered a price elastic good/service.

However, nowadays, the taxi cab service may be considered as a price inelastic good/service, meaning any increase in price would not result to a significant decrease in demand. In one way, this cab service has become a necessity. It has become so common and relatively affordable to ride cabs.

Side note: You should see the SLU-Bakakeng students going to or coming from school. They cannot ride in packs. They need to take solo cab rides. As better said in the vernacular, “Sino makakapagsabi na naghihirap ang Pilipinas kung makita mo ang daan-daang estudyanteng pumapasok sa eskwela na na mag-isang naka-taxi?”

Going back to the main topic. Let us try to trace how this fare hike came about. Operators and drivers of taxi cabs in the city submitted a petition to the LTFRB for this fare hike, citing the increasing cost of gasoline or diesel, higher prices of spare parts, etc.

What caused these increases?

Well, the cost of fuel is continuously increasing due to the volatility of the world prices of oil of which the general trend of prices is, yes, you guessed it right! They’re going up. It was exacerbated by the higher excise tax imposed on petrol products. Spare parts prices are also getting higher and higher due to higher costs of shipping and the like.

So with these circumstances, it is inevitable that fare of public utility vehicles (PUVs) would increase. The taxi cabs went first. And I feel that there is an impending increase in the jeepney fares as well in the very near future.

With these higher fare matrix, surely, the commuters would have to tighten their belts and take lesser taxi rides as result. Unfortunately, though, this adjustment will only be short-lived, for a few weeks to a few months, showing that the taxi cab service is elastic (sensitive to increases in price) in the short-run.

But once the commuters feel that it is not worth it to walk far for lesser fare, the demand for taxi cabs would return to “normal”. The energy of the person is more costly than the taxi ride. This just proves that the indeed this service has become inelastic (insensitive to price change), and is now considered a necessity.

What about the many requirements before the taxi meters are calibrated? Aside from assuring the comfort and security of the commuter, I can’t think of any economic theory that would push the government to make the producer/supplier spend more, before they get incentive of higher revenues. This may even result to break-even or loss on the part of the operator. Anyway, that’s for another time.

The taxi operators side (supplier side) will be analyzed in next week’s edition of this column. Happy riding!
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