IN this week’s publication we read interesting stories about the control of the medicines and the choices commuters have to make between using taxis or buses. We realise the impact government has on business with its regulation policies, a thin line between perfect and imperfect competition.

Competition should occur on each side of the market, where in the goods and services markets the buyers compete to obtain the good or service and the sellers compete to sell the good or service to the buyers.

Analysing both the medicines and transport industries, we observe all the necessary requirements are present except for government’s intervention, which shifts the businesses to become so imperfect.

There must have been no government intervention to influence buyers and sellers for a market to be perfect, where perfect competition consists of all buyers and sellers of the good or service provided. In our case, the demanders are buyers and the sellers are suppliers like taxi operators and medical practitioners, whether traditional or modern.

Is government’s intervention a bad thing?

Well it makes sense if regulation and control of the medicines will ensure safety and quality to preserve lives. But it is worrying if government’s interference in the transport market is influencing the behavior of both commuters and transport operators.

In this case both commuters and taxi or bus operators are price takers after government has set prices instead of the market setting its own prices. Under normal circumstances, the prices should have been given by what quantities of taxis and buses to supply or demanded by commuters at that price.

Perfect competition can only occur when none of the individual market players, that is buyers and sellers, can influence the market. Yet, we notice how powerful government can be in setting market prices away from the market forces of demand and supply.

For both the medicines and transport markets, there is a large number of buyers and sellers - the number big enough so that no individual buyer or seller can affect the market price. Each (taxi or bus) and (pharmacy or traditional medicine practitioner), can only supply a fraction of the total market supply.

Despite government’s control, there should have been no collusion between sellers or service providers as each would act independently.