|Due By (Pacific Time)||12/13/2016 12:00 am|
Continuing from our Uber discussion, we will now look at the impact Uber has made on the markets and the prices for the resources needed for these markets.
1. Use your knowledge from Unit Three: Before the arrival of Uber into Dallas, assume that the transportation network firms consist of only a few cabs that operate within the city limits (Cowboy Cab and Yellow Cab). What type of market structure is this (pure comp., monopolistic competition, oligopoly, or monopoly)? Defend your answer by explaining how these cabs are able to set prices (using economic concepts). What can we expect to happen to the long run profits of these firms in the long run? Why?
2. Use your knowledge from Unit Three: After the arrival of Uber into Dallas, assume that now taxi cab consumers can easily substitute away a taxi cab for an Uber. Also, assume that shortly after the arrival of Uber, new entrants are coming into the market for transportation such as Lyft. Given the arrival of these new entrants, has the market model for transportation changed? Defend your answer by explaining how these cabs would like to set prices (using economic concepts). What can we expect to happen to the long run profits of these firms in the long run? Why?
3. Use your knowledge from Unit Four: Assume that in the not too distant future, the drivers of Uber and Lyft form a union and demand more pay and benefits. Furthermore, assume that in this not too distant future, capital and labor become highly substitutable in the transportation industry. What can the substitution effect tell us about the outcome of this scenario?
UPDATED Grading note: Be aware that your grade is based on two categories.
i. While answering these questions, you will be graded on your ability to combine economic theory along with your answer. Be aware that in economics, we invoke “ceteris paribus” which means “all else equal” or “nothing else changes.” We are ONLY interested in investigating one economic variable changing and all the outcomes associated with that change. Please review chapter 1 for more information on this prior to answering your questions.
ii. Post at least one reply to another classmate’s post. You will be given credit for providing feedback for another member’s post only on the condition that you include economic theoretical input with your reply. For example, if one reply’s with “I agree with your view on #2, it was well written and I love how you talk about Uber’s prices.” This will receive zero credit.
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