The paper "Uber Taxi Economics " is an outstanding example of a macro & microeconomics assignment. After comparing the cost of a standard taxi ride versus a ride with UberX from Deakin University, Burwood campus to the Melbourne Tullamarine airport, I would prefer UberX. The reason why I would prefer UberX is that its pricing model guarantees the traveler a cheaper price almost all the time compared with the price charged for a Standard taxi ride. Uber pricing is cheaper than that of Standard Taxis with research indicating that Taxis are more expensive than Uber 89% of the time.
For instance, the maximum taxi rate is more than double Uber’ s per minute rate which is also replicated per kilometer rate (News. com, 2016). The Taxis prices are regulated with maximum prices in each stage with two or three pricing brackets including the day rate, the peak rate and the overnight rate. On the other hand, Uber’ s pricing is variable fluctuating with demand and supply through its surge pricing. Even with surge pricing, UberX is still cheaper than Standard taxi rides.
From an economic point of view, therefore, I would prefer the cheaper priced UberX. The long-run equilibrium of the taxi industry and individual monopolistic competitive taxi companies before and after the introduction of UberX In the long run, with free entry and exit, the price in the market will be equal to the industry’ s marginal cost as well as the average total cost. Firms in the industry will thus choose their quantity so that the marginal cost will equal price (Castle, 2015). This will ensure that the firms will maximize their profit.
In the long run, entry into and exit from the industry will drive the pricing of taxi rides to the minimum point on the average total cost curve. Thus, the long-run equilibrium for the industry will be as follows, After the entry of Uber In the monopolistic competitive taxi industry, the monopoly-like pricing will result in a decreasing demand in the long-run for the already existing firms as customers prefer the cheaper Uber. This will increase the need for differentiation in the industry-leading to increasing average total cost.
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