(a) Explain why variability in the price of Uber rides due to surge pricing is likely to be moderated where travellers have readily available substitutes such as public transport or other ride-sharing apps.

(b) Consider the demand and supply for illicit drugs. Assume you have been appointed by the government to recommend on an optimal policy to tackle the problem. You are told that the price elasticity of demand (or own-price elasticity) is <1 (i.e., inelastic) and that the price elasticity of supply is>1 (i.e., elastic). Would you recommend the government intervene on the demand side or the supply side. Explain your answer. What sorts of policies would you recommend?