Loose-leaf Version for Economics & LaunchPad (Twelve Month Access)
4th Edition
ISBN: 9781319035877
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 3, Problem 1BCQ
To determine
Competitive markets for taxi rides before UBER was introduced
Concept Introduction:
Competitive Market:
A competitive market is the one with a large number of buyers as well as a large number of sellers. The sellers compete with each other in the market in order to satisfy the buyer’s needs.
Expert Solution & Answer
Explanation of Solution
Determination of
- Before Company U came into existence in 2009, the prices of the taxi rides were set by the city regulators and were intimated to the taxi drivers.
- The taxi drivers, based on these rates, charged their customers depending upon the distance travelled by them in the taxi with the help of the taxi meters.
Market for taxi rides is a competitive market.
- A competitive market is the one with a large number of buyers and sellers. In such a market, the sellers sell homogenous products at a set price.
- The N city is highly populated with a number of people looking for a taxi ride every day. Moreover, the taxis are easily available in the city.
- Thus, it can be said that the market for rides in N city is a competitive market with the prices set by the city regulators.
Conclusion:
Thus, market for taxi rides is a competitive market and prices are set by the city regulators.
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Chapter 3 Solutions
Loose-leaf Version for Economics & LaunchPad (Twelve Month Access)
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