4.4 [related to the Economics in Practice on p. 161]

As Uber continues to become a more convenient, and in many cases, less costly alternative to traditional taxi service for many of its customers, the income and substitution effects have an impact on the demand side of the market. Also, because a majority of Uber drivers have another job and therefore driving for Uber becomes a way to supplement their income, the income and substitution effects impact the labor supply market.

Discuss the income and substitution effects generated by Uber from both the customers’ demand perspective and the drivers’ labor supply perspective.