Transport Planning Department - Evaluating Impact of Cost per Mile Change on Taxi Services with Supp

Task 1: Drawing supply-demand curve and indicating equilibrium point

You work for a city council in their transport planning department. The city has a large number of taxis currently operating within the city limits, and the council sets the ‘price per mile’ that they charge. You have been asked to evaluate the impact on the number of taxis were the  cost per mile to be changed. A recent market survey suggest that the demand for taxis journeys is as follows:

A consultation with local cab firms suggests that only very few would be able to continue in business at £1 per mile, but that there would be a much larger fleet available at £2 per mile,  as shown in the following table:

Information from the same survey suggests that cabs make 25 journeys per day on average.

You have been asked to draw a correctly formatted supply demand curve and indicate on it the equilibrium point. But you also need to provide a description for members of the council who are not familiar with economic concepts of (i) what such curves show, and more specifically (ii) what the equilibrium point indicates.

The city council are considering applying a congestion charge to all vehicles (including taxis) that operate within city limits. This would have the effect of increasing the price per mile that  taxis charge by £0.50. You have been asked to comment on the impact that this would have.

You have also been asked to calculate the ‘price elasticity of demand’. Again, for the benefit of council members, you also need to comment on what this value means in this context.

Price per mile £1.00 £1.25 £1.50 £1.75 £2.00 Journeys per day 12500 10000 7500 5000 2500 Price per mile £1.00 £1.25 £1.50 £1.75 £2.00 Number of cabs in service 50 100 200 400 800  2019-2020 LMR37 Additional Assignment Page 2 of 2

This city council are also considering what to do about the fares charged on the city’s metro and light rail systems. You need to explain to council members whether or not the same approach could be applied to metro and light rail transportation within city limits.

You need to write up your response to the above four tasks and submit this in PDF format to Canvas in the same way as you would do for an assignment. There is no specific format for submissions (there is certainly no need to use the assignment template), but to facilitate anonymous marking you must clearly indicate your Student ID number at the start of your submission and not your name.

This supplementary assignment must be submitted on Canvas by 23:59 hours on 18th May 2020 to avoid marks being deducted for late submission. Your supplementary assignment will receive an overall score and feedback through Canvas in the normal manner.