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 is based on the concept of supply and demand. When there is a shortage of drivers, the price is increased to incentivize more drivers to enter the market, and when there is a surplus of drivers, the price is decreased to attract more riders. This demonstrates that when there is a shortage in a market, the equilibrium price will rise.

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