In many large cities you can now use your cell phone to call Uber or Lyft instead of hailing a taxi. Would you expect this to affect the prices of taxi medallions (that is really the supply of taxis)? Why or why not? Talk about supply and demand curves in your answer. Or better yet, draw them and include them in your answer. (You can do that on paper and use your phone to upload to your blog.)
Can you think of an example where you watched the supply of a good or service change rapidly? (For example, a new hotel or restaurant opened.) Based on the chapter what would you expect to see happen? Why?
Give another example of a concept from this chapter. For example I am a regular user of AirBnB. How did AirBnB affect the supply of short term rentals in your area? How about long term rentals?
Taxi medallion prices in New York City dropped when Uber and Lyft took off in the city. They lost half their value. As riders choose to use personal vehicles and the easy to use apps of Uber and Lyft, the taxis were less valuable and demand for their type of service dropped. Taxi companies failed to innovate and held prices constant because they thought they had a locked down market. If taxi companies invented an app when the iPhone came out in 2008 could they have provided amazing value in the market to a point that consumers would have been locked into their new advanced service? Interesting to think about. Uber an Lyft took the customers by increasing the supply of ride providers to the market. Shifting the supply curve to the right, thus lowering the prices and taking money from the taxi drivers. At the same time the demand for taxi services would have shifted to the left lowering the prices even further. The supply for ride services flooded the market. Did the consumer win? Yes. Usually with innovation the consumers win.
One recent example of a supply changing rapidly was in my region the hospitality industry was hit hard by the covid travel restrictions and fears. The hospitality workers in my area couldn’t afford to live here and left. Now that hospitality reopened and we are trying to bring guests back into our community we are seeing the lack of workers affecting our businesses. We don’t have the staff to stay open and provide all the services we used to. Supply changed quickly and then demand came back strong, and now our workers are not here.
Another example in our mountain towns is when covid hit everyone moved to work from home. All of those work from home workers wanted to escape the close cities and wanted to move up to our small mountain towns. The supply of new homes and existing homes for resale could not keep up with the new demand. Home owners didn’t want to sell as there wasn’t other places they wanted to be. Prices for homes soared and continue to soar. This isn’t restricted to our region, this is all around the USA. The prices of wood and copper went up high during covid, and the builders haven’t been able to build fast enough. The supply of homes outside of the cities in the USA is too low and lagging the demand. Prices are so high compared to a year ago, or 2 years ago. Same with campers and RVs, same with cars and trucks, same with many items. I work in the IT industry and the global chip shortage is really hurting our business. We order laptops in June that are just showing up in September. Prices are starting to tick up too. The supply of computers and chips is really hurting many businesses. Some auto makers are now saying they are stopping production of vehicles due to the chip shortage.
Dude.World 