Consider the market for taxi service in San Francisco. Explain how the following events will affect the equilibrium (??,??)in the taxi market. Consider each case separately. Use supply and demand curves to defend your answer graphically.

a)Bus fares increase after a strike by bus drivers.

b)Taxi drivers must pass a competency test, and one-third fail.

 

c)The price of a taxi permit increases and consumer income increases. Assume that taxi service is a normal good. Show each event on separate graphs. After you perform comparative statics for each graph, determine the overall net effect on P* and Q. Note, if you get conflicting results, e.g. Price increases and decreases, then the net result is indeterminate.

 

d)Half the downtown parking lots are converted to office buildings.

Answer rating: 100% (QA)

a If bus fares increase after a strike by bus drivers it would lead to more people opting for taxis ... View the full answer