I just Need help rewriting the equations for the first step and from that point
ID: 1137029 • Letter: I
Question
I just Need help rewriting the equations for the first step and from that point forward I know what I have to do.
Incidence, elasticity, and symbolic analysis: Uber acts a market maker in the market for car rides, connecting the demand side (passengers) with the supply side (drivers). In exchange for this Uber charges fees on every ride: when the consumer pays P the driver receives 0.75P and Uber receives 0.25P. In essence then Uber's business model involves a 25% ad valorem tax on rides. Suppose that the supply and demand in the market for rides in Pittsburgh is 3. a120-2P Qs = 4P Rewrite the demand and supply equations to explicitly incorporate Uber's fees. Draw a graph of this market that shows the market with and without Uber receiving 25% of the fare. Find what the equilibrium price and quantity in the market for rides would be if 100% of the fare went to drivers. Find the price paid by consumers, price received by sellers, and the quantity with Uber taking its 25% it Using your results from parts (c) and (d), calculate share of Uber's fees that fall on consumers. In Pittsburgh the demand for rides is likely to be different when the universities are in session and when they are not. During the school year assume the demand for rides is larger and more inelastic-as characterized by the demand equation: a. b. c. d. e. f. Qd = 160-P For the demand when university is in session find: 1) The price paid by consumers and price received by sellers without Uber's 25% fee 2) The price paid by consumers and price received by seller with Uber's fees 3) The share of Uber's fee that is paid by consumers. g. How does the consumer's share differ In (e) and (f). What is the economic intuition for this?Explanation / Answer
As asked,
a. The Ad-valorem tax is the tax, the amount of which increases with the increase in price. It is levied on the supplier. In the case of Uber, suppliers are the drivers. This tax doesn't affect the demand equation.
So the initial equations are - Qd = 120 - 2P and Qs = 4P
When we rewrite the equations to incorporate the Uber's fees. They are -
Qd = 120 - 2P and Qs = 4(P - 0.25P)