Expect each to impact the demand for taxis

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At Dulles airport, only taxis and privately owned cars are allowed to use the highway between downtown and the airport. That taxi market is competitive. There is a special lane for taxis so they are always able to travel at 55mph. The demand for taxi rides depends on the taxi fare (P), the average speed of a private car on the highway (E), and the price of gas (G). The number of fares supplied by taxis will depend on the taxi fare and the price of gas.

A) Suppose P,E and G change. How would you expect each to impact the demand for taxis?

B) Suppose Qd = 1000 + 50G - 4E - 400P and Qs=200 - 30G + 100P. Find the equilibrium taxi fare. Assume G=2.5 and E=50.

C) Suppose UBER drivers start servicing riders to and from Dulles. What would you expect to happen to your answers from part C?

Reference no: EM13853580

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