1i. A disruptive technology is a relatively new term and has no spcific and precise definition. It is commonly known as ‘a new emerging technology that unexpectedly displaces an established one’(Fonseca, 2014).’ As the name suggests such a ‘disruptive’ technology often findsa place by disrupting/ disturbing the existing technology. The newertexchnology is accepted easily as it is more efficient and sometimes easy to adapt. It may not be a proven technology and may lack experience, but its newness and uniqueness finds many takers. The word was coined in 1997 in The Innovator’s Dilemma by Clayton M Christensen, a Harvard School professor. (Clayton et al., 2015)
ii. Since the first time this term was used in 1997, many innovations and newer technology have been termed disruptive. Some of them died as they were not applicable on wider levels, while others sustained and have nbeen used and improved over time consistently. Two prominent and successful ones include:
Artificial intelligence is now finding multple users in fields as diverse as medicine, to robots.
Self driven vehicles are another disruption to driver driven cars. They obviate th eneed for drivers and find applications in war ravaged areas where armymen can be saved from landmines and enemy shootings, despite being able to deliver food, weapons and other essentials to warring areas. The savings of labour involved in everyday driving and the scope for zero accident deaths is another application that is pushing this technology further.
2: i The following fare is based on start point: Deakin College (Burwood) and end point : Melbourne CBD.
Fare for a Silvertop taxi ride: $37
Fare for UBer X ride: $32-44
Source: SilverTopTaxi: https://www.silvertop.com.au/ ; Uber: https://www.uber.com/en-AU/fare-estimate/
ii. Notice that while a simple taxi gives exact values for the fare, Uber does not do that. It gives a range because the actual fare depends on real conditions like traffic available taxis and number of people looking for taxi, and the actual idling time. This way each operator uses a different model that explains the different fares. Even when start and stop destinations are same the fare vary due to :
Differences in model used. This model can be explained in terms of the determinants of demand and supply of taxis. A simple taxi operator typically uses distance an time of the day, along with car size ( perhaps) to determine fare. The model is static in nature. Uber uses dynamic pricing model that updates demand and supply on real time basis.
iii. Using a simple demand supply model we have equilibrium at P* and Q*. With surpluses as shown. The efficiency is maximum as welfare = sum of producer and consumer surplus is maximised.
iv. The introduction of UberX affects supply initially. As more drivers join Uber, the supply of taxis will expand. The supply curve shifts downwards. We are now lower in prices and more quantity of taxi rides in the market for tax rides. It is possible that demand also increases as people want to experiment with a new service. But it is not clear if total demand will rise or some simple taxi riders will shift to Uber. The effect on demand is thus unclear and ambiguous. The supply effect is clear and expected and that is why we talk about it.
The new lower price will improve consumer surplus, as part of initial producer surplus is transferred to the consumer. The producer himself will benefit as his surplus expands despite some transfer to consumer. The expansion in producer surplus is shown in red.
3i. Price elasticity of demand is defined as the (Csun.edu., n.d.)‘ degree of responsiveness of demand to price changes’. Demand can be elastic or inelastic depending on the absolute value. A negative sign means that the good obeys the law of demand; price and demand are inversely related. A value of -0.8 shows an inelastic demand.
When we introduce UberX, elasticity changes to become more elastic as the value exceeds 1 now. Price elasticity of demand depends on many factors, some of which are as follows:
The rise in elasticity for taxi rides is sensible and rational as UberX gives more choice/ substitutes to riders. This makes demand more elastic, as seen in a rise in its value from 0.8 to 1.2, keeping the negative sign intact.
ii. The diagram below uses a simple demand supply model, where the free market price/fare is P*. Since P* is too high, a lower cap is fixed at P1. This causes a deadweight loss or a loss of efficiency. It also creates shortage of taxis, where some riders are forced to go without taxis as drivers refuse to take them at a fare of P1. The riders who do get a taxi are happier as they pay a P1 that is lower than P*. Thus some are happy and some are unhappy with P1. Overall society suffers.
Dynamic pricing is a system of setting prices using demand supply model on real time basis. It’s dynamic nature refers to the constant changes in demnd and supply that are incoporated in the system. This system can come up with a fare lower than P*, at some time if demand is lower or supply is higher. The fare is not fixed at all, and changes very time a rider requestan app. The fare is calculated the second demand is created/ generated via the app. There is no rrom for capping the fare here as actiual fare can be lower than P* or even P1 at times. Since the fare is not fixed, there is no sense in calling the fare high or low. (Dynamic pricing, n.d.)
In the diagram below we shows a fare of P2 determined by S2 and D2. This P2 is even lower than P1. The new demand and supply curves are based on distance/route, idling time and traffic conditions, and quantity of drivers available in the vicinity of demand generated. This dynamic aspect of the system reduces deadweight loss as the fare is determined by demand and supply with no interference from artificila caps/limits.
References
Clayton, Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is Disruptive Innovation. Retrieved August 30, 2017, from Hbr.org: https://hbr.org/2015/12/what-is-disruptive-innovation
Elasticity. (n.d.). Retrieved May 30, 2017, from Econ.ohio-state.edu: https://www.econ.ohio-state.edu/jpeck/H200/EconH200L5.pdf
Fonseca, M. (2014). Guide to 12 disruptive Technology Examples. Retrieved August 29, 2017, from Intelligenthq.com: https://www.intelligenthq.com/technology/12-disruptive-technologies/
Gallo, A. (n.d.). A refresher on price elasticity. Retrieved August 15, 2017, from Hbr.org: https://hbr.org/2015/08/a-refresher-on-price-elasticity
Help.uber.com. (n.d.). Retrieved August 28, 2017, from Dynamic pricing: https://help.uber.com/h/34212e8b-d69a-4d8a-a923-095d3075b487
Impact of Shifts in demand and supply. (n.d.). Retrieved June 3, 2017, from Econport.org: https://www.econport.org/content/handbook/Equilibrium/Impact-.html
Price floors and ceilings. (n.d.). Retrieved August 24, 2017, from Econport.org: https://www.econport.org/content/handbook/Equilibrium/Price-Controls.html
Supply and demand. (n.d.). Retrieved June 1, 2017, from SSC.wise.edu: https://www.ssc.wisc.edu/~scholz/Teaching_101/Lecture3.pdf
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download