question archive In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides
In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides
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In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all rides are the same distance and therefore cost the same. The accompanying table shows the demand and supply schedules for taxi rides.
| Quantity of rides (millions per year) | ||
|---|---|---|
| Fare (per ride) | Quantity demanded | Quantity supplied |
| $7.00 | 10 | 12 |
| 6.50 | 11 | 11 |
| 6.00 | 12 | 10 |
| 5.50 | 13 | 9 |
| 5.00 | 14 | 8 |
| 4.50 | 15 | 7 |
Assume that there are no restrictions on the number of taxi rides that can be supplied in the city (i.e. there is no medallion system). Find the equilibrium price and quantity.
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