Thursday, May 17, 2007

Price increase

Wheat price has increased by 15 cent and this has sparked public dissatisfaction over rising price of daily necessities lately.
Hope for wage increase is mounting now. Understandably the lower income group really suffer.
I consider the upward pressure of controlled items such as oil & diesel, cooking oil, wheat, chicken etc is the effect of price control mechanism. Once you impose price control, the market mechanism is no longer flexible to adjust to the supply and demand. In the long run, the government can't no longer subsidize/support the price control without having to release some of the burden to the producer/consumer. So far the trend seems indicating that the consumers bear the burden most of the time.
Producers could effectively protect their interest because of their strong lobby on the government.

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