The wage raise will increase cost which will increase rate to both consumers and taxi drivers based on elasticity.
If the demand is in elastic, the burden will go to the consumers.
But if the supply is inelastic, the burden will go to the taxi drivers.
However, if the fare goes beyond the market standard, people may stop hiring taxi and that will reduce the income of the taxi driver.
Dear akhil, if the supply is inelastic, the burden will go to the taxi drivers simply because using a taxi is not an inelastic service, people can do without it. So shift in price will drastically impact consumer demand. In this case if the prices of hiring a taxi increases people will opt for other means of transport and the taxi driver will lose cutomers.
please explain why?if the supply is inelastic, the burden will go to the taxi drivers.