(Solved): Case 3: Uber Surge Pricing and Demand Elasticities In case of rideshare market such as Uber, surgin ...

Case 3: Uber Surge Pricing and Demand Elasticities In case of rideshare market such as Uber, surging the price dampens demand. It was observed that if prices increased for a ride from $$\$5.00$$ to $$\$6.00$$, a $$1.2\mathrm{x}$$ increase in price, there was a precise $$27\%$$ drop in demand. Based on the above information and the illustrative figure below that depicts surge pricing, answer the following questions: Exhibit 3: Uber Surge Pricing Example and Commentary a) What is the estimated price elasticity of demand (PED) for Uber? Interpret your answer. b) Is this estimated demand elastic or inelastic? What could be a reason for it? Explain your answer. c) What would be the impact of such surge pricing on Uber's revenue? Would it be a good decision to charge surge prices frequently if it wishes to maximize profits?