Economics Assignment Containing Questions On Supply And Demand Concepts Economics Assignment Assignment

1789 words - 8 pages

ASSIGNMENT: ECON 5100
ASSIGNMENT:
On October 28, 2016, it was announced that in the UK, Uber drivers won a key employment case which classifies the drivers of Uber as workers rather than self-employed drivers. The consequences of this historic case mean that Uber drivers will now be entitled to holiday pay, paid rest breaks, and at least the national minimum wage.
Question 1: For the moment, ignore the above announcement and assume that irrespective of distance, the price Uber will charge is fixed. Illustrate how the following 4 events (listed below) are likely to cause a change in the demand (and equilibrium price and quantity) for Uber. Provide a graph and a brief analysis for each event.
a) An increase in the price of taxi fares:
Let E1 be the point of equilibrium, where the demand for Uber is equal to the supply of Uber. In the event of increase in the taxi fares (other than Uber), the demand for Uber will increase and as a result the demand curve will shift from D1 to D2. The new equilibrium will then be achieved at point E2.
P D2
D1 S
Price
Q1 Q2 Q
Quantity
A large investment from the government into public transportation (assume it happened immediately):
Let E1 be the point of equilibrium, where the demand for Uber equals to the supply of Uber. In the event of a large investment from the government in to the public transportation, the demand for Uber will drop from D1 to D2, hence the equilibrium will be achieved at point E2.
P D1
D2 S
Price
Q
Q2 Q1
Quantity
An announcement that Uber has no security control on the qualities of cars (and drivers) that are on the road:
Let E1 be the point of equilibrium, where the demand for Uber equals to the supply of Uber. In the event of the announcement that Uber has no security control on the quality of cars, the demand for Uber will drop from D1 to D2 and the new equilibrium will be achieved at point E2.
Macroeconomic indicators suggest that unemployment is at record low, GDP per capita has increased dramatically, and real wages are record high:
Let E1 be the point of equilibrium, where the demand for Uber equals the supply of Uber. In the event of record low unemployment and record high wages, the demand for Uber will rise from D1 to D2. More and more people will use Uber in place of public transportation. In which case the new equilibrium will be achieved at point E2.
P D1
D2 S
Price
Q
Q2 Q1
Quantity
P D2
D1
Price
Q1 Q2
Quantity
Question 2: Suppose the labour supply for Uber drivers is QS = 10W, (where W is the price of labour measured by hourly wage), and the demand for working at Uber is QD = 240 – 20W. Q measures the quantity of labour hired (in thousands of hours)
a) What is the equilibrium wage and quantity of Uber drivers working in equilibrium?
For equilibrium wage: QS = QD
10W = 240 – 20W
W = 8 (equilibrium wage)
Therefore, the...

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