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# fall 2016 eco401 assignment 1

ECONOMICS (ECO401)
ASSIGNMENT NO. 01
DUE DATE: NOVEMBER 21, 2016
MARKS: 20
ASSIGNMENT:
The Case:
Uber Technologies Inc. is an American worldwide online transportation network company
whose headquarter is in San Francisco, California. This company was established in 2009. It
developed markets over 66 countries and 507 cities all over the world. Those people who have
cars can register with this company and can earn money. Services of this company are also
beneficial for the consumers because fare is very low. This company also started services in
Pakistan in March 2016. Uber service demand is increasing day by day and car holders are also
getting registration. Suppose the Uber Company in Pakistan is facing the following demand and
supply functions:
Qd = 4000-4P
Qs= 1000+P
Where ‘Pis the price of fare per ride and Qdis quantity demanded in terms of number of cars
demanded by consumers. Qsis number of cars offered by company.
Requirements:
a) Find equilibrium price and equilibrium quantity of cars. Also show equilibrium condition
with the help of graph.
b) Calculate price elasticity of demand using point elasticity method when the company is in equilibrium and interpret the result.
c) What will be the effect on the equilibrium situation of the company if fuel prices increase remarkably in the market? Illustrate graphically.
(Marks: a: 2+2+3, b: 5+3, c: 5)
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### Replies to This Discussion

ECO401 Assignment#01 Solution

ECO401 Assignment#01 Solution

b) Calculate price elasticity of demand using point elasticity method when the company is in equilibrium and interpret the result.

Qd = 4000-4P

PЄd = ∆Q/∆P*P/Q

P∈d = dQ/dP*P/Q

= (-4)*(600/1600)

= -1.5

ECO401 Assignment#01 Solution

ECO401 Assignment#01 Solution

EC0_401SOLUTION.doc

ECO-401_Solution.DOCX

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