For a long time, lending money to finance the purchase of taxi medallions was a very good business---almost as good as printing money some said. Over two decades from 1990-2013, the value of a New York City taxi medallion rose 720%, making it a better investment than stocks, oil or gold. Today, the price of those medallions has sharply decreased with the introduction of Uber and Lyft. The New York medallion system limits the number of taxis, but each taxi driver can offer as many rides as he or she can manage. (Now you know why New York taxi drivers are so aggressive!). To simplify our analysis, however, we will assume that a medallion system limits the number of taxi rides that can legally be given to 10 million per year. With the Fare (per ride) on the vertical axis and quantity of rides on the horizontal axis, the following information has been provided: Fare Quantity Demanded Quantity Supplied $7.00 6 14 $6.50 7 13 $6.00 8 12 $5.50 9 11 $5.00 10 10 $4.50 11 9 $4.00 12 8 $3.50 13 7 $3.00 14 6 Prepare graphs based on the following information: At $5.00 per ride, how many rides will consumers want to buy? And how many rides will be supplied? What is the equilibrium point ? Suppose that the supply and demand for taxi rides is changed and now the quota is set at 6 million rides ? What is the price of a ride The deadweight loss ? Suppose the quota is increased to 9 million? What is the price of a ride? What has happened to the deadweight loss?
For a long time, lending money to finance the purchase of taxi medallions was a very good business---almost as good as printing money some said. Over two decades from 1990-2013, the value of a New York City taxi medallion rose 720%, making it a better investment than stocks, oil or gold. Today, the price of those medallions has sharply decreased with the introduction of Uber and Lyft.
The New York medallion system limits the number of taxis, but each taxi driver can offer as many rides as he or she can manage. (Now you know why New York taxi drivers are so aggressive!). To simplify our analysis, however, we will assume that a medallion system limits the number of taxi rides that can legally be given to 10 million per year.
With the Fare (per ride) on the vertical axis and quantity of rides on the horizontal axis, the following information has been provided:
Fare Quantity Demanded Quantity Supplied
$7.00 6 14
$6.50 7 13
$6.00 8 12
$5.50 9 11
$5.00 10 10
$4.50 11 9
$4.00 12 8
$3.50 13 7
$3.00 14 6
Prepare graphs based on the following information:
At $5.00 per ride, how many rides will consumers want to buy? And how many rides will be supplied? What is the equilibrium point ?
Suppose that the
- What is the price of a ride
- The
deadweight loss ? - Suppose the quota is increased to 9 million? What is the price of a ride? What has happened to the deadweight loss?
Prepare a graph to show what if demand decreases by 2 million rides, what is the new
Use a graph to illustrate the effect of the entry of Uber on the demand for Taxi Medallion taxi rides.
Has the fight between Uber and the taxicab industry turned political? Explain.
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