Transport of Hulhumale and Demand, Supply and Elasticity

Transport of Hulhumale and Demand, Supply and Elasticity

Introduction

In economics Supply is the willingness and ability of producers to create goods and services to take them to market. Supply is positively related to price given that at higher prices there is an incentive to supply more as higher prices may generate increased revenue and profits. And demand is defined as to the willingness and ability of consumers to purchase a given quantity of a good or service at a given point in time or over a period in time. So for the purposes of this assignment the supply would be the sources of transport of Hulhumale which includes Ferry and Express link provided by MTCC and bus. And demand would be the willingness of people to purchase these services. As mentioned before there is two major ways of travel between Male’ and Hulhumale. Which is ferry and speedboat. And within Hulhumale in land there is car (taxi) and bus.

Factors affecting demand and supply of transport services

The first factor is the Price of travel. People are more likely to choose a particular mode of transport depending on what they will spend on the journey. So the average person on regular travel will choose the ferry because it’s less expensive. But in a state of urgency the cost might not be a major element as these supersede the price so in these cases people will choose the speedboat as that will get them to their destination quickly and conveniently.

Another factor is the travel time. This refers to the total time that one will spend to reach their destination. For example If the person thinks that traveling to Hulhumale takes too much time he/she might choose to travel to an island closer to Male’ such as villigili. And if it takes more time travelling through the route of the bus the person will be willing to spend more money to hire a taxi because it’ll take you straight to the destination without stopping at any bus stops.

Service quality also has an influence in demand and supply of transport. Service quality is a major factor that affects the choice of mode of transport. Travelers want a service provider that offers quality services that match the price. Players in the market have a task of standing out by offering superior services to woo more travelers. When the quality of services is above reproach, travelers would be willing to dig deeper into their pockets and pay for what befits their needs.

Reliability of the mode of transport further determines the quality of the services. Reliability refers to the dependability of a transport service provider to meet your needs without disappointments. This may also include other aspects such as accessibility and confidence. Passengers will go for services that they can rely on and find them obtainable regularly and are long-term. One sure way of enhancing reliability is sticking to the announced schedules, stating the departure and expected arrival time. Other factors affecting demand and supply of transport, which relate to quality of service, are security and professionalism of personnel.

Tax and subsidy effect on the market of transport.[pic 1]

Tax:

If buyers have many alternatives to a good with a new tax, they will tend to respond to a rise in price by buying other things and will, therefore, not accept a much higher price. In 2013 MIRA introduced taxes on transport. And a 6 percent of tax was taken from them. Which caused the price of the ticket and us services to increase. As the diagram above suggests as the tax is imposed the quantity demand decreased and the price increased. The ticket charges increased to RF5.30 and the bus fare increased to RF2.12.

“It is not that we have increased the prices of our services. We have just added the GST 6 percent to our services,” Fariq told local media. “As such, GST will be collected from ferries from Hulhumale’, Vilingili, Gulhee Falhu, Thilafushi and province ferries as well as Hulhumale’ bus services.” (Minivan News. (n.d.))

Subsidy:[pic 2]

A subsidy is a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. Marginal subsidies on production will shift the supply curve to the right. This will increase the demand and decrease the price. There is no subsidy given for transport between Hulhumale and Male’. This is because it is run by one company which so MTCC so there is no other options for the customers. So this is considered elastic.

Elasticity:

Elasticity is a measure of a variable's sensitivity to a change in another variable.

In business and economics, elasticity refers the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes. It is predominantly used to assess the change in consumer demand as a result of a change in a good or service's price.[pic 3]

                           Elasticity=

Factors that affect elasticity.

Nature of commodity: There are two types of goods necessities and luxuries. A necessity is a good or service a person cannot live without and a luxury is a good or service that a person chooses to indulge in which the person can live without. Reflecting to our situation the only way to travel between Male; and Hulhumale is by using the ferry service or by speed boat. So the ferry service is a necessities if a person wishes to travel. But traveling by speed boat is a luxury as he chooses that while there is a cheaper option.