The "dynamic pricing" model used by the ride-sharing ﬁrm Uber, along with a few other ﬁrms, illustrates which of the following?
A) When there is shortage in a market, the equilibrium price will rise.
B) Once the equilibrium price is reached, it will remain there for at least several days.
C) Since actual quantity bought always equals actual quantity sold, the market is always at equilibrium.
D) When there is surplus in a market, the equilibrium price will rise.

Question

Quizplus · Accepted Answer

Dynamic pricing adjusts prices based on demand and supply in real-time. When demand is high and supply is low, the price will increase to reach a new equilibrium price point where the quantity demanded equals the quantity supplied. Therefore, it illustrates that when there is a shortage in the market, the equilibrium price will rise.

The "Dynamic Pricing" Model Used by the Ride-Sharing ﬁRm Uber