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Question

The table below provides the demand schedule for rides on Uber,a popular ride-sharing service that works in competition with thetaxi industry. Use the information provided to complete the table,filling in the blanks where indicated. show your work foreach column.

Rate

Quantity Demanded( Number of rides, Thousands)

Total Revenue (Thousands of Dollars)

% Change in Price

% Change in Quantity Demanded

Elasticity

$1/Mile

25

___

___

___

___

$2/Mile

20

___

___

___

___

$3/Mile

15

___

___

___

___

$4/Mile

10

___

___

___

___

$5/Mile

6

___

___

___

___

$6/Mile

3

___

___

___

___

A) Suppose Uber is currently charging $1.50/mile. To increasetotal revenue, should Uber raise or lower rates? Explain ina sentence.

B) Suppose Uber is currently charging $5.50/mile. To increasetotal revenue, should Uber raise or lower rates? Explain ina sentence.

Solution

(x)xxxx(x)Quantity xxxxxxxx(Number xx xxxxx)(xxx,1 xxxx =

xxxxx)(x) = (x) * (x)

xxxxx xxxxxxx (xxxxxxxxx ofDollars)

(x)% xxxxxx xx xxxxx

(x)% xxxxxx xx xxxxxxxy Demanded

(x) = (x) / (x)Elasticity

[ (% xxxxxx xx xxxxxxxyxxxxxxxx) / (% Change xx xxxxx) ]$x/xxxxxx,xxx$xx,xxx---$x/xxxxxx,xxx$xx,xxxxxx%xx%x.x (xxxxxx is xxxxxxxxx)$x/xxxxxx,xxx$xx,xxxxx%xx%x.x (Demand xx xxxxxxxxx)$x/xxxxxx,xxx$xx,xxxxx.xx%xx.xx%x (xxxxxx is xxxx elastic)$5/Mile6,000$30,00025%40%1.6 (xxxxxx xx xxxxxxxxy elastic)$6/Mile3,000$18,00020%50%2.5 (xxxxxx is xxxxxxxxy xxxxxxx)x) xx Uber xx currently xxxxxxxx $x.xx/xxxx. xx increasetotal xxxxxxx, Uber xxxxxx xxxxx xxxxx. Because xx this xxxx (xxxx&xx; $x/xxxx), Demand xx inelastic, x.x. xxx xxxxxxx change xxxxxxxx is xxxx xxxx xxx percent xxxxxx in xxxxx (xx xxxxxxx fromthe xxxxx). So, xx xxxx xx decreased, xxx demand xxxx xxx xxxxxxxxxx that xxxxxxxxxx, thereby xxxxxxxx xxx xxxxxxxxxxxx.x) If xxxx is xxxxxxxxy xxxxxxxx $x.xx/xxxx. To xxxxxxxxxxxxx revenue, xxxx xxxxxx xxxxx the xxxxx. Because xx xxxx xxxx(xxxx > $x/xxxx), Demand xx xxxxxxxxy xxxxxxx, i.e. xxx percentchange xx xxxxxx xx more xxxx the xxxxxxx xxxxxx xx price (xxxxxxxxx from xxx xxxxx). xx, if xxxx is xxxxxxxxx, xxx xxxxxx willincrease xx a xxxxxx xxxxxxxxxx, xxxxxxy increasing xxx totalrevenue.

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