Explain how this effects the value of the quota

Reference no: EM133650123

Question: Cities often regulate the number of taxis by setting a quota (i.e., there can only be X amount of taxis operating in a given city). The quota ensures a taxi fare (i.e., the demand price) is in excess of the 'supply' price. Further, the difference between these prices represents the unit value of the quota. Historically, taxi companies have relied on the quota system as a means of retirement income (i.e., sell their quantity of the quota at the unit value price, and retire off the earnings).

However, Uber, Lyft, and other ride-share companies have entered this market, and operate in an unregulated manner (i.e., there is no quota placed on ride-share offerings). This has led to a considerable decline in the demand for taxis. Using a graph, explain how this effects the value of the quota for taxis. Show all work including the quota restriction and fall in demand.

Reference no: EM133650123

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