Unit 1: Introduction to Microeconomics Opening Case-Let: Uber and the Economics of Ride-Sharing Questions: How does Uber's use of dynamic pricing (surge pricing) reflect the economic principle of price elasticity of demand? Answer: Surge pricing is a prime example of price elasticity of demand. When demand is high (e.g., during rush hour or bad weather), Uber increases prices. If demand is inelastic (people need rides urgently and are less sensitive to price), they'll still use Uber despite the higher cost. If demand is elastic (people are more sensitive to price), some will opt for alternatives, thus impacting Uber's revenue. What are the positive and negative externalities associated with Uber's entry into the ride-sharing market, and how do they impact urban areas? Answer: Positive externalities: Increased availability of rides, potential reduction in drunk driving, and possibly less traffic congestion as more people opt for ride-sharing over car ownership. Negativ...
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