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Chapter 4 HMWK

In many large cities you can now use your cell phone to call Uber or Lyft instead of hailing a taxi.  Would you expect this to affect the prices of taxi medallions (that is really the supply of taxis)?  Why or why not?  Talk about supply and demand curves in your answer.
Can you think of an example where you watched the supply of a good or service change rapidly?  (For example, a new hotel or restaurant opened.)  Based on the chapter what would you expect to see happen? Why?
Give another example of a concept from this chapter.  For example I just used AirBnB to rent an apartment in San Francisco.  How did AirBnB affect the supply of rooms to rent in San Francisco?


Because of the convenience of using Uber, I would expect consumers to prefer it over traditional taxis. Even if they didn't have a strong preference, there would be an increase in the availability of transportation. So the supply of transportation shifts to the right. When demand for taxis decreases, the demand curve shifts to the left. This creates a surplus, so prices fall towards the equilibrium.

When I worked a snow-cone and hot dog booth one summer for a weekend festival, during the last hour of the last day we would offer buy-two-get-one-free deals. Prices decreased when demand decreased. Because the product on hand could not be saved for future sales, it was better to capture a smaller profit margin than no sale at all. 

AirBnB increases the supply of rooms to rent, which shifts the curve to the right.

 Another example could be when non-government organizations donate huge quantites of supplies to a developing country, such as rice or building materials. When this happens long-term, it creates a surplus and local farmers or craftsmen respond by having to lower their prices.

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