Review of Supply and Demand for Uber Essay

Submitted By ams4971
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Review of Supply and Demand for Uber

Uber is a technology company that operates a smartphone app based service to provide transportation in large cities. Unlike the traditional services of taxis and car services, Uber has differentiated itself by having service providers use their own vehicles, which allows the company to avoid large costs associated with operations, maintenance, licenses, insurance and fuel. The app based system allows for consumers to request transportation and prepay for services. The company has met challenges breaking into new cities and continues to face competition. According to the US. Bureau of the Census, Total Revenue for Taxi Service, Establishments Subject To Federal Income Tax, Employer Firms 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 Hailo and Lyft. The value Uber 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 a 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 Uber 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…