How prices work

This letter refers to the news report ‘ICT admin cracks down on overpricing, arrests vendors’ (June 26, 2024). Vendors are the last point of a long supply chain. They work on small margins and have almost no control over prices. Arresting them thus amounts to harassment for no fault of theirs. This is a bad reflection on the competence and sincerity of our political leaders and bureaucrats. It seems they have never even seen an elementary level book on economics and think they will control prices by arresting vendors. The retail trade in Pakistan is as close to the perfect competition model of economics as one can get. There are a large number of buyers and sellers and no control over entry or exit for a trade. If there is more profit in a trade, new producers will enter the trade and reduce prices and vice-versa. In this situation, prices are the lowest possible. Interference by the government under the prevailing conditions will only result in increased costs and prices. If the government cannot provide any relief to the poor, it should at least avoid harming them.

Abdul Majeed

Islamabad