Review of Supply and Demand for Uber
In 2013, the total revenue was approximately 2,317 Million dollars. Competition for Uber comes from taxis, car services as well as new app based service providers such as Hail and Left. The value Auber has offered is on-demand services for consumers with generally more affordable rates and shorter waiting times for transportation. For the suppliers, or drivers, the value is in flexible hours, alternatives to working for traditional transportation service provider and a new way of operating this service (Forbes, 2014).
An article from August 10, 2015 appeared in The Economist which discussed Taxi vs.. Uber, Substitute or Compliment. Data shown in the article showed that there was a 7. 5% increase in rides in New York City over a two year period. The article brought about many points to consider to understand the economics of supply and demand. Supply has been shown as Auber has been able to meet an unmet need of consumers needing reliable transportation in an on-demand format.
Uber has met the supply of service providers in New York by offering higher prices to drivers during off peak hours where there was a demand for services. Uber has provided higher price to increase supply in New York by paying higher rates to employees to provide off peak hours transportation in order to meet the demand during these hours (Economist, 2015). Uber, like most companies, sees a change in supply and demand. When prices to consumers increase, the demand decreases. When Auber has price decreases through special programs, the demand increases.
According to Collins and Areas (2004, peg. 58), the law of supply shows that as price rises, the quantity supplied increases. Therefore, it appears that Auber can follow a traditional supply and demand model by using dynamic pricing. Surge pricing is also utilized in high peak periods of demand. The surge pricing allows for Uber to decrease the demand during peak times by increasing the supply of drivers. According to Cooling and Are, supply relates the quantity Of a good that will be offered for sale at each of various possible process, over some period of time (peg. ). The Times article showed that Buyer’s dynamic surge pricing was dynamically triggered and based on calculations that showed peak wait times and ride requests that we not filled. Auber utilizes the surge pricing due to the price elasticity of the supply and demand curve.