To Surge or Not to Surge: the Algorithm Is the Question

Answer the following questions to check your understanding of the story.

What is surge pricing in the market for Uber rides?

Uber ____________the price of a ride when _____________.

a) fixes; the number of drivers maximizes Uber's profit

b) increases; the demand for rides increases at peak travel times

c) decreases; the supply of Uber rides decreases

d) increases; the number of available drivers increases

What is price gouging and when does it occur?

Price gouging occurs when ______________.

a) the seller raises the price of an essential good because the supply of the good suddenly decreased

b) the buyer of an essential good is willing to pay a higher price because the demand for it has increased

c) the seller raises the price of a popular good because the demand for the good has increased

d) the buyer of a popular good offers to pay a higher price to get to the front of the line

If Wendy's used surge pricing for burgers, would Wendy's be price-gouging?

a) Yes, because Wendy's wants to control the supply of its burgers

b) No, because the demand for Wendy's burgers hasn't changed much.

c) Yes, because a Wendy's burger is a tasty good that most people enjoy

d) No, because a Wendy's burger is not an essential good and its supply has not suddenly decreased.

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