MAE101 Economic Principles
Table of Contents:
Table of Contents: 1
Part A: Disruptive Technologies 2
Task 1: Industry Structure: 2
Task 2: Prices 5
Part 2: Economics of Military Conflict 8
References: 11
Part A: Disruptive Technologies
Task 1: Industry Structure:
a) Comparing the costs of the two rides- the standard taxi and the Uber ride, as a consumer one would prefer to go in the uber taxi as it is much cheaper (40% lower than the taxi). As the law of demand says, when the price of a commodity is lower (than it substitutes), it is demanded more in quantity. Since the Uber ride is much cheaper than its substitute, the regular taxi, the consumers would prefer to ride in Uber taxis than in the standard taxis. This is mainly due to the substitution effect of Uber being cheaper than standard taxis(William Baumol, 2012).
b)
(i) In the monopolistic competition industry like that of taxi industry where there are many players, an introduction of uber taxi will shift or lower the demand for standard taxi as shown in the following figure of the industry. This will create short run losses for the firms in the taxi industry, but in the long run, some of the firms in the industry will leave the market (as they are not able to cover the costs) and hence the other firms will be making zero profits in the long run as shown in the figure of the firm(Hubbard et al., 2013).
(I.C. JPS 1760)