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MAE101- Economic Principles

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Deakin College

   

Economic Principles (MAE101)

   

Added on  2020-03-01

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This assignment aims to examine the economic impact of ridesharing following the introduction of UberXin to the Australian point-to-point transport market in 2014. Specifically, we will focus on the effects on consumers and producers in the point-to-point transport market and the related welfare effects. The assignment will draw on your understanding of some of the key concepts and models.

MAE101- Economic Principles

   

Deakin College

   

Economic Principles (MAE101)

   Added on 2020-03-01

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Answer 2:i.We provide comparison of a one way trip from Deakin College (Burwood) to Melbourne CBD. Fare in a taxi ride: $37Fare in a UBer X : $32-44Source: SilverTopTaxi:; Uber:https://www.uber.com/en-AU/fare-estimate/ii.The difference in fares can be explained in terms of the model used by the taxi driver to price the ride as the distance and start-destination points are same. The actual fares maybe still more divergent based on the traffic incurred and time taken for idling at traffic signals or for other reasons. In terms of modelling we can hint at two reasons for differences in fares:1.UberX uses dynamic pricing which is a real time system that matches demand and supply at every second to determine the free market rate. It allows for dynamic shifts in demand and supply curves (or the market forces) to determine the fare in a free market. The simple taxi ride uses a ‘fixed’ fare kind of model that only looks at distance as the governing factor . 2.Some difference can also be attributed to the difference in car possibly. We can expect a bigger taxi to charge a higher fare.iii.The diagram is shown belowWhen UberX is introduced we can expect the demand and supply to shift. We can expectsupply to rise as more taxi owners join UberX. This will shift the supply curve to right as shown. The effect is that prices will fall, while number of rider will increase.
MAE101- Economic Principles_1
WE show the rise in total surplus in ed. This happens because price is lower and quantityis higher now. While demand can also change we cant be sure of the quantitative changes without actual data. All we can conclude is that society surplus or efficiency will improve if prices are lower and quantity is higher. Answer 3:i.Price elasticity measures the responsiveness of demand to price changes, if all other determinants of demand are unchanged. Its value varies from 0 to infinity, reflecting complete inflexibility of demand to complete flexibility. A demand elasticity value of -0.8implies two things:
MAE101- Economic Principles_2

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