Managerial Economics: Demand and Supply Analysis, Land Value Tax, Subsidies

0Running head : MANAGERIAL ECONOMICS
Managerial Economics
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MANAGERIAL ECONOMICS
Table of contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................4
Question 3..................................................................................................................................7
Reference list............................................................................................................................10

Q Q*
A B
P
QUANTITY
D D*
MANAGERIAL ECONOMICS
Question 1
(a)
Fig 1: Shift in demand curve
(Mankiw, 2014)
Uber rides are initially at equilibrium at the point A. The initial equilibrium was at
point Q. After severe storms the demand for Uber rides usually rises and therefore, there is a
rightward shift in the demand curve. Here, Uber charges the same price in spite of the high
demand as a result of severe storm. The demand curve shifts from D to D* and the
equilibrium point moves from A to B. initially, the demand for Uber rides were Q and after
the result of severe storm the number of Uber Rides increased to Q*. As Uber was not
charging any surge price at that point of time, the price remained constant at P.
PRICE

S
D
D*
P
P*
Q* Q
Price
quantity
MANAGERIAL ECONOMICS
Fig 2: Movement of the demand curve
(Mankiw, 2014)
(b) When the Uber rides started imposing surge pricing, the price rises from P* to P as
demand increases. After the severe storm the demand for Uber Rides increased from D* to D
and therefore, the price also increases (Abubaker, 2018). Initially, before storm the number of
Uber rises in demand were Q* and after the strom the demand for Uber increased to Q.
( C) The consumers who got the Uber ride without thesurge pricing will be at a profit than
tose consumers who had to pay higher price. Consumers are definitely worse off with surge
pricing than those who does not have to pay higher price. However, the surge pricing will
benefit the consumrs if only Uber provides more cabs durng the high demand after severe
storms.