The aim of this assignment is to examine the economic impact of ridesharing following the introduction of UberX into the Australian point-to-point transport market in 2014. Specifically, we will focus...

The aim of this assignment is to examine the economic impact of ridesharing following the introduction of UberX into the Australian point-to-point transport market in 2014. Specifically, we will focus on the effects to consumers and producers in the point-to-point transport market and the related welfare effects. The assignment will draw on your understanding of some of the key concepts and models we have studied in chapters 4 & 5 (together with some sections from chapters 6, 7 & 8) of Gans et al XXXXXXXXXXEnsure your responses to the assignment questions use economic terminology and analysis. Question 1 – Disruptive Technologies i. What is the meaning of the term “disruptive technology”? (1 mark) ii. List 2 examples of a disruptive technology and briefly explain in what way it has been disruptive to the existing market. (2 marks) Question 2 – UberX and the point-to-point transport market i. Compare the cost of a one-way trip from Deakin College (Burwood) to Melbourne’s CBD using a taxi, with using an UberX. List both fare costs and provide a source where you retrieved your information from. (1 mark) ii. Identify and briefly discuss 2 factors that help to explain the difference in the cost of using a taxi and an UberX. (2 marks) iii. Consider the point-to-point transport market before the introduction of UberX. Use a fullylabelled demand and supply diagram to represent the point-to-point transport market when only taxis operate. (You do not need to use actual data for this diagram). Show the consumer and producer surplus available in this market. Using the same diagram, illustrate the effect on demand and/or supply following the introduction of UberX. Explain the changes you have made including any changes to consumer and producer surplus. *Use the Insert ? Shapes ? Line feature in MSWord to draw and label your diagram. (6 marks) 3 Question 3 – Price Elasticity and The Invisible Hand i. It was estimated by the ACT Government XXXXXXXXXXthat the price elasticity of demand for taxi services without ridesharing services such as UberX, is -0.8. Briefly interpret this price elasticity estimate. It was also estimated by the ACT Government XXXXXXXXXXthat if UberX services were included, the price elasticity of demand for taxi services is -1.2. Again, briefly interpret this estimate and also explain why it has changed. (2 marks) ii. The taxi industry has heavily regulated fares, with fixed maximum fares, whereas UberX uses ‘dynamic pricing’. Define dynamic pricing in the context of UberX and explain why it is welfare enhancing. [Suggestion – Consider how free-markets allocate scarce resources via the invisible hand of market prices – Chapter 4 Gans et al. Also think about the implications of price caps (ceilings) to market efficiency/welfare - Chapter 6 Gans et al.] (6 marks)