Dynamic pricing in the cab market, from the transcript (you can listen here):
RENEE MONTAGNE, HOST:
This is MORNING EDITION from NPR News. Good morning, I'm Renee Montagne.
These days, you can hail a ride in some cities with the quick tap of a smartphone. The app for Uber connects drivers for hire to riders. And that car service has gotten attention lately because of its pricing system. At times, Uber rides can be cheaper than metered taxis. But when demand for a ride is high, the fare can be three, five, or even nine times as much as the regular rate.
Lisa Chow of NPR's Planet Money Team took a ride with an Uber driver, during this week's big snow storm in New York City, to explore the fast-changing rates. ...
... CHOW: ... Uber tracks customers and drivers down to the street level. So sometimes fares are popping in one part of the city and not another. And in theory, what should happen is as more drivers see a part of the city where fares are high, they all go there. Now supply has met demand, and prices should come down.
[Uber driver Kirk] Furye says, he sees that happen all the time. It's a pain in the butt.
FURYE: When I first started out, I used to chase the surge. But that became exhausting because it would always go somewhere else by the time I got there.
CHOW: And did you ever catch it? Catch the surge?
FURYE: Do I ever catch the surge? When I was running for it, I think I might have caught it, like, once, twice tops. And then I realized it wasn't worth it. I missed it a lot more times than I caught it.
CHOW: So this appears to be working as it should. But it doesn't feel like that to a lot of people.
Would you pay double the price to get a cab today?
SHALONDA MCNICHOLSON: No.
CHOW: Shalonda McNicholson is near Penn Station waiting for a cab. She had never heard of the company Uber. When I explained the way Uber prices its rides she said this...
MCNICHOLSON: That's ridiculous. Ridiculous. It's not fair. We didn't ask for the snow.
CHOW: Richard Thaler, an economist at the Chicago Booth School of Business, says no matter what most economists say surge pricing just feels inherently unfair to most people, which means Uber might be treading in tricky territory.
RICHARD THALER: I think the question will be: How big a multiple the market will stand up for. And my intuition is it's a number in the ballpark of three.
CHOW: That consumers will tolerate three times the normal fare but not really more than that. Thaler says, if you look at industries in which prices do respond quickly to demand. Take hotels, for instance. If you're booking a room during Christmas, you'll probably pay a lot more. But you'll rarely pay more than three times the normal price. Uber sometimes goes way above that - seven, eight, nine times.
But Uber is hoping this gets their drivers to do what my driver did. When I called Furye the day after the storm, he told me he ended up working a 17 hour day; riding the surge as long as he possibly could.
Make sure all of your funny talking friends see this:
Changing economics and shifting tastes have claimed roughly one out of every five pubs during the last two decades in Britain, and things are growing worse. Since the 2008 financial crisis, 7,000 have shut, leaving some small communities confronting unthinkable: life without a “local,” as pubs are known.
And that has spurred the government into action. New legislation is letting people petition to have a pub designated an “asset of community value,” a status that provides a degree of protection from demolition and helps community groups buy pubs themselves, rather than seeing them get snatched up by real estate developers eager to convert them for other uses or tear them down. Since the Ivy House, a beloved local in south London, became the first to receive the designation last year, roughly 300 others have followed suit. ...
Still, the traditional pub is being squeezed as never before, even after George Osborne, chancellor of the Exchequer, reversed course last March and reduced the tax paid on every pint of beer, by a penny. Antismoking laws are keeping smokers away. Cut-price beer for sale at supermarkets is eating into business. In London, the upward spiral of real estate prices has made pubs attractive targets for developers.
And then there is a cultural shift on this isle of bitter, porter and stout: People in Britain are drinking about 23 percent less beer than a decade ago, according to the British Beer and Pub Association. Pubs have been trying to take up the slack with other beverages and expanded food menus.
On another level, Britain’s pub trouble is also an echo of the deregulatory fervor of Margaret Thatcher. In the 1980s, her Conservative government broke up the near monopoly that brewers held over pubs. But the breweries were replaced by large, independent companies that have since gobbled up a little over half of the nation’s pubs. These “pubcos” often own the land, determine what beer pubs can sell and can charge high rents.
Many workers may opt to work less to retain their eligibility for Medicaid or federal subsidies under Obamacare, a new report has found.
The Affordable Care Act could reduce the labor force by the equivalent of 2.5 million workers in 2024, according to the non-partisan Congressional Budget Office's annual outlook.
That doesn't mean employers will start swinging the ax or even that that many jobs will be lost, CBO says. Rather, more people will likely opt to reduce their hours, or leave the workforce entirely, so they stay under the income caps for Medicaid and federal subsidies.
"The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses' demand for labor," the report says. Therefore, it will more likely show up as a decline in share of the population participating in the labor forceand in hours worked, rather than in spikes in unemployment or underemployment.
This story has it all. Beer, Demand, Supply, Intrigue, Social Media Shaming, Denial. Really, What more could you ask for on a Friday?
Jude DuPart first took the picture because he couldn’t believe the audacity of this guy. There he was, up by the grocery store cash registers, trying to buy more than 400 bottles of a limited-release beer.
DuPart pulled out his phone and snapped a photo.
He didn’t expect what happened next.
In the world of beer enthusiasts, the annual release of a limited batch of brew is better than a birthday party. Bars announce the arrival of a tap like it’s a newborn baby.
And so DuPart, a 24-year-old beer enthusiast, went to the Giant Eagle in Clintonville on Jan. 24 to buy Hopslam, a super hoppy bottle of joy that Michigan brewer Bell’s releases once a year. That’s when he saw the guy, with more than $1,200 worth of Hopslam, talking to store employees about whether he would be allowed to buy all of it. In the midst of the debate, DuPart grabbed two $17.99 six-packs for himself and left before the situation was resolved.
At home, he started connecting the dots. He recognized the beer-buyer as an employee at a nearby beer shop. He posted the photo on a message board: “This guy works at Savor Growl and just tried to buy ALL of Clintonville GE’s Hopslam.”
I have two high school-aged daughters and I teach an introductory level principles of microeconomics class. One of the disconnects I see between high school math and college-level economics classes is students have a difficult time applying basic math concepts. Students can DO the math, but they can't APPLY the math outside of a 'math' class. I focus here on math, because that is where I see the disconnect most often. I admit this is a biased observation, as I am sure that other disciplines share similar frustrations with other subjects.
My contention, based on almost 20 years of observation, is that seeing how math can and will be used later, through somewhat realistic examples, will help students retain basic concepts until 'later' occurs.
So here is my first foray into what might turn into a series of posts I've tentatively titled "What in the world will I ever use this for?" (WWWTF--or something like that) If you have other suggestions, I would be glad to hear them in the comments.
I am intentionally keeping this simple and leaving out a lot of explanation. You can think of this as an example you might find in a high school level math textbook.
Who knows, this might catch on and help educate.
Math Concept: Linear equations and the intersection between two lines
Equation of a line: One way to write the generic equation of a line is: Y=mX+b. This is called the slope-intercept form of a line and represents the relationship between an independent variable (X) and a dependent variable (Y)--that is Y depends on X. The slope of the line (m) tells us the rate of change in Y when X changes by 1 unit. For example, if the slope of the line is 2 (m=2) then every time X increases by 1, Y increases by 2. The constant (b), sometimes called the y-intercept, tells us how big Y will be when X=0.
Intersection between two lines: When two lines cross, they will cross at only a single point (unless they have the exact same slope). This is called the point of intersection. The point of intersection happens when the two Y-values for the lines are equal to each other and teh two X values are equal to each other too. An example will help. Here are two lines:
Line 1: Y=2X+3
Line 2: Y=-3X+8
There a number of different ways to find the point of intersection. Here I will describe what I think is easiest when both lines are in slope-intercept form.
Because at the point of intersection both Y's and both X's are equal, we can set the right hand side of line 1 equal to the right hand side of line 2:
Now we just need to rearrange terms to solve for X. Adding 3X to both sides and subtracting 3 from both sides gives us:
Dividing both sides by 5 gives us:
Now that we have X, we can find the Y value for the point of intersection by plugging X=1 back into either Line 1 or Line 2 (if we did the math right we should get the same answer for both):
Now you ask, what in the world will I ever use this for?
Application: Predicting price in the U.S gas market
Economists believe two 'laws' hold when people are buying and selling things: The Law of Demand and the Law of Supply.
Buyers want to buy more stuff at lower prices and less stuff at higher prices. This is called the Law of Demand. For example, at higher gas prices, drivers buy less gas, and at lower gas prices, drivers buy more gas. Economists represent the relationship between the price of gas (call it P) and the quantity of gas drivers buy (call it Q) using a demand function. Based on data from the U.S. government, the monthly demand function for gasoline in the U.S. (per person) can be represented by a linear equation.
Demand Function: P = 5.3- 0.14 Q
Some questions to think about:
What is the slope of the demand function for gasoline (hint: rearrange the demand function into a form similar to Y=mX+b where y is represented by P and X is represented by Q?
How does the slope of the demand function relate to the Law of Demand?
If the demand function represents what buyers want, we also need to represent what sellers want in a market. Sellers want to sell less stuff at lower prices and more stuff at higher prices. This is called the Law of Supply. Continuing the gas example from above, economists represent the relationship between the price of gas and the quantity of gas sellers want to sell using a supply function. For example, suppose the monthly supply function for gas in the U.S. is:
Supply Function: P = 0.27 Q
Some questions to think about:
What is the slope of the supply function?
How does the slope of the supply function relate to the Law of Supply?
Economists can use demand and supply functions to predict gas prices in markets and to predict how much of something will be bought or sold in a market.
To predict the price in the gas market, we need to find a price where the quantity of gas that buyers want to buy is exactly equal to the quantity of gas sellers want to sell. We call this price the equilibrium price.
Using the demand and supply functions above, we can answer the following questions:
What is the predicted equilbrium price in the U.S. gas market?
What is the predicted quantity of gas bought and sold in the U.S. per person per month?
Neither the United States Department of Agriculture nor the National Pork Producers Council has data on the number of pastured pigs, though in 2006, research done at Iowa State University estimated that the drift, as a group of pigs is known, numbered from 500,000 to 750,000.
Several factors are driving the appetite for pasture-raised pork, grocers and chefs say. Consumers are increasingly aware of and concerned about the conditions under which livestock is raised, and somewhat more willing to pay higher prices for meat certified to have come from animals that were humanely raised.
One of the major mistakes made by government is to assume that a price increase always leads to revenue increases:
At the same time, out-of-state students could be looking at significantly larger tuition bills. ...
Some of the out-of-state hikes were already set by the legislature last year, which mandated 12.3 percent increases at UNC-Chapel Hill, N.C. A&T, UNC Wilmington and UNC School of the Arts. Lawmakers enacted 6 percent hikes at 10 other campuses, including East Carolina and N.C. Central universities.
The legislative move was unusual in that it bypassed the Board of Governors, which sets tuition annually for the state’s public universities. On Thursday, UNC officials said they would seek to repeal the legislative increases, because the hikes could negatively affect some universities’ ability to attract talented students from outside North Carolina. ...
The higher demand is likely to support a higher price tag, Woodson said. ...
UNC-CH Chancellor Carol Folt said the campus conducted market research that showed the 12.3 percent increase could result in a 10 percent reduction in applications from out-of-state and perhaps a 20 percent decrease in those who choose to enroll. Still, the campus Board of Trustees has asked for a 2.5 percent increase on out-of-staters.
It’s unclear whether UNC will succeed in its effort to get the legislature to repeal the hikes.
The demand for enrolling at UNC by out-of-state students is elastic since the percentage change in quantity demanded (20) is greater than the percentage change in price (12.3). A small price increase will lead to a larger decrease in quantity demanded and revenue will fall (if the market research is sound).
The North Carolina legislature's tuition increase for UNC, intended to raise revenue, would actually it. Lower revenue for UNC would justify additional budget cuts ... so maybe the NC legislature knows what it is doing!
One of my New Year's resolutions is to be a better blogger (don't we all resolve that every year?). For example, not to post anything on old news. Ah, well, resolutions are made to be broken. Here is an old story as I'm have an hour to catch up from the holiday break before I take another break:
American farmers have prospered during a three-year boom in corn and cropland prices. As values have soared since 2011, farmers bought more acres and upgraded their harvesters to produce a record corn crop of almost 14 billion bushels in 2013. ...
Now, as corn prices start to decline, bankers and agricultural economists are predicting a slowdown in farmland prices that could turn into a bust. ...
U.S. farmers, whose earnings grew an average 6 percent in 2013, face several challenges: a likely reduction in corn exports to China after a record year; greater competition from other nations; moves in the U.S. and the European Union to limit the use of ethanol, a biofuel made from corn; and a possible record production of the crop in 2014.
Kohl said a plunge in land prices would strip value from farms and put over-leveraged farmers out of business. Farmland prices are up 72 percent to about $8,000 an acre in the last three years, according to data from the U.S. Department of Agriculture. In Iowa, the largest producer of corn, the gain was 90 percent, according to the Iowa State University in Ames.
The third paragraph is going to be a little confusing for anyone who doesn't obsess about this stuff. First, why would corn exports fall after a record year? Some demand condition isn't being described. But this isn't a challenge, unless farmers treated a temporary demand increase like a permanent one and borrowed too much money. Second, why would "record production of the crop in 2014" be a problem in 2014? It might be that the demand for corn is inelastic so that a big increase in supply leads to a smaller increase in quantity demanded (in percentage terms) and revenues will fall (or it might just be bad writing).
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