Consider a market for rides (as in the market that Uber operates). Demand for rides is given by QD=120-2P. Supply of rides by drivers is given by Qs=10P. The equilibrium price in this market is 100 The consumer surplus is 2500 v The producer surplus is 500 v. Note that producer surplus is calculated in the standard way. Some of it goes to drivers and some to Uber. The total surplus is 3000 v Suppose now that Uber sets the price of a ride at $12. The quantity of rides in the market is now 96 The consumer surplus is now 2304 v The producer surplus is now 691.2 v (still calculated in the standard way). Assuming Uber's revenue is 20% of ride revenue, their revenue at the equilibrium price is 200 v and at a price of $12 is 230.4 v.

Consider a market for rides (as in the market that Uber operates). Demand for rides is given by QD=120-2P. Supply of rides by drivers is given by Qs=10P. The equilibrium price in this market is 100 The consumer surplus is 2500 v The producer surplus is 500 v. Note that producer surplus is calculated in the standard way. Some of it goes to drivers and some to Uber. The total surplus is 3000 v Suppose now that Uber sets the price of a ride at $12. The quantity of rides in the market is now 96 The consumer surplus is now 2304 v The producer surplus is now 691.2 v (still calculated in the standard way). Assuming Uber's revenue is 20% of ride revenue, their revenue at the equilibrium price is 200 v and at a price of $12 is 230.4 v.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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