Reference no: EM132217856

Article:In New York post-Sandy, the lack of subways can be just as troubling as the lack of electricity.... Plenty of other people in New York are turning to car services this week. But Uber, a San Francisco-based start-up with operations in most major cities in the United States, said it was struggling to get enough cars on the road to meet demand. On Wednesday morning, it imposed a special “surge” fee — a rate of at least double the normal fare. Several New Yorkers didn’t take the price hike lightly. They complained on Twitter.... Travis Kalanick, Uber’s chief executive, said in an interview that the higher fee was necessary to give more drivers an incentive to get onto storm-ravaged roads and squeeze through traffic to pick up people for rides

Question:Now consider the surge pricing that Uber uses during busy times. According to Uber’s chief executive, surge pricing is ‘necessary to give more drivers an incentive to get ontostorm-ravaged roads and squeeze through traffic to pick up people for rides.’ Do you agreewith this statement? How would the use of surge pricing affect the market outcome on a day when there is a snow storm? Explain using the demand/supply model with diagrams.