In HK, the no. of urban taxi licenses issued by the government is fixed.
a) Draw a supply curve to illustrate this situation.
b) Suppose the government decided to issue more urban taxi licenses.With the aid and demand diagram, explain
i) how the market price of an urban taxi will be affected
ii) why the total market value of all urban taxi licenses in HK might increase.
F.4 econ
2007-11-29 4:34 am
回答 (1)
2007-11-29 6:23 pm
✔ 最佳答案
a) Draw a VERTICAL supply curve.b)(i) The vertical supply curve will shift to the right as incresae in supply. The market price will be lowered.
(ii) It was because that the demand on taxi licenses is ELASTIC, as market price falls, the total market value of all urban taxi licenses will rise. The reason is that the % rise in quantity is higher than % drop in price.
It can be illustrated by a relative less-sloped demand curve.
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