• March 29th, 2016

Introductory Microeconomics

Paper, Order, or Assignment Requirements

Question 1

Read attachment 1.

  1. a) The article states that ‘higher fees at the facilities were meant to generate more revenue for the city’. What does this suggest about the City of Manhattan’s estimate of the own-price elasticity of demand in the market for tennis courts? Explain your answer. (1 mark)
  2. b) The article states that ‘the city expected it would take in an extra $6.3 million … but the revenue grew by just $1.1 million.’ What does this suggest about the actual own-price elasticity of demand in the market for tennis courts? Is it elastic or inelastic? Is it more or less elastic than what the City of Manhattan expected? Explain your answer. (2 marks)

Question 2

Read attachment 2a. Uber is a service that matches private drivers to passengers that are seeking a ride from one place to another. Assume that the market for Uber rides is perfectly competitive.

  1. a) Suppose that the market for Uber rides is initially in equilibrium. According to the article, what happens to the demand and supply for Uber rides during snow storms? Suppose Uber always charges the same price per kilometre travelled independent of the circumstances. Is the market still in equilibrium? Explain using the demand/supply model with diagrams. (2 marks)
  2. b) Now consider the surge pricing that Uber uses during busy times. According to Uber’s chief executive, surge pricing is ‘necessary to give more drivers an incentive to get onto storm-ravaged roads and squeeze through traffic to pick up people for rides.’ Do you agree with this statement? How would the use of surge pricing affect the market outcome on a day when there is a snow storm? Explain using the demand/supply model with diagrams. (1 mark)
  3. c) In general, are consumers better or worse off with surge pricing, as compared to the case without surge pricing? Consider two different types of consumers: (i) the group of consumers who would have gotten an Uber ride without surge pricing; and (ii) the group of consumers who can only get an Uber ride with surge pricing, but not without. How does surge pricing affect the welfare of these two groups of consumers? Explain using the demand/supply model with diagrams. (2 marks)
  4. d) Read attachment 2b. According to the article, Uber has agreed to cap its surge pricing policy ‘during natural disasters and states of emergency’. What kind of market intervention is this? How does this affect the price and quantity traded of Uber rides? Explain using the demand/supply model with diagrams. (1 mark)

Latest completed orders:

Completed Orders
# Title Academic Level Subject Area # of Pages Paper Urgency