Apps like Uber and Lyft really seem to have taken control of the taxi industry, especially is large cities where these services are more prevalent. This has certainly affected yellow cabs because now they must lower their prices to compete with a more convenient service such as Uber. The rates that Uber and Lyft charge aren’t necessarily cheap, but they have a more flexible system for both the consumers and the drivers. Allowing drivers to work on their own schedules, these services are more readily available for consumers through the simple tap of a button on their smartphone screens. For these more advanced, technology-based companies, this means the ability to charge similar if not higher rates than old-school taxis while still having higher demand along with higher supply.
The reason a service like Uber is able to keep a near-perfect supply and demand curve is because they are only paying the drivers when they are working, and the passengers have their demands met at any time because there’s always a driver available at any time of the day. If there’s a low demand, then Uber keeps its supply at that equilibrium level by not having to pay for labor from the drivers.
A perfect example of a supply of a service changing rapidly right in front of me was when I went to a Rockies game in Denver and right after the game, hundreds of people who were drinking needed a ride home so they were getting Ubers nonstop. It was late at night, and with that much demand, Uber was going to be able to keep up with supply but of course the rates of the rides were skyrocketing. On our way to the game, we paid $13 for the Uber ride in which we were alone with the driver. On our way back to the hotel, we paid $47 for the exact same milage and we had to share the car with other passengers. We saw this happen because the demand was so high at that particular time that Uber could afford to charge ridiculously high prices while still staying at that equilibrium point, which was now higher because there was now a higher equilibrium price and equilibrium quantity.
A service like AirBnB affected the supply of short term room rentals by providing a higher supply of them, which drove the prices of hotels down or else there would’ve been a surplus. AirBnB doesn’t seem to have very affordable option as far as long term rentals go, but since the demand for rentals in a city like San Fransisco is probably very high, these AirBnB rentals were able to charge ridiculous prices and still keep supply equal with the demand, much like my Uber example of prices that can just skyrocket and maintain equilibriums.
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