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Suppose that the supply and demand for taxi rides is given by Figure 9.1 and a quota is set at 6 million rides. Replicate the graph from Figure 9.1, and identify each of the following on your graph:
the price of a ride
the quota rent
the deadweight loss resulting from the quota.
Suppose the quota on taxi rides is increased to 9 million.
What happens to the quota rent and the deadweight loss?
Again replicate the graph from Figure 9.1. Suppose that the quota is 8 million rides and that demand decreases due to a decline in tourism. Show on your graph the smallest parallel leftward shift in demand that would result in the quota no longer having an effect on the market.