ANSWER ALL QUESTIONS Q1. Extract A Total Number of Vehicles available for taxi journeys in London 2005-2015 The number of Private Hire Vehicles and Black Cabs in London Private Hire Vehicles Black Cabs 70,000 60,000 62,754 Number 50,000 49,324 50,663 49,854 of 40,000 vehicles 30,000 40,000 44,363 20,000 20,750 21,596 22,303 22,558 10,000 22,168 22,500 2005 2007 2009 2011 2013 2015 Years NB: Black Cabs are available for immediate hire and can be hailed in the street (known as 'plying for hire'). Black Cabs can also accept pre-bookings. Private Hire Vehicles (PHVs) must be pre-booked and cannot use taxi ranks. It is illegal for PHVs to ply for hire. (Source: adapted from @ Crown Copyright) Extract B Taxi Wars: Uber and the rise of the App For years black cabs and private hire vehicles (PHV) have only ever competed with each other but there is a new competitor Uber - a Californian technology giant - that's trying to take over the streets. Its smartphone app gives users the opportunity to book an Uber taxi at the touch of a button. The user can follow the taxi's journey via a GPS generated image and it allows the passenger to pay online so no physical cash needs to change 5 hands. Uber is attracting a large number of drivers with offers of flexible working hours, the ability to earn up to 1900 a week in fares and cash incentives for recruiting other drivers. Tens of thousands of drivers have so far been recruited. 2(a) What is meant by "predatory pricing"? [2] (b) Using Extract A, calculate to two decimal places the percentage change in the number of private hire vehicles in London from 2013 to 2015. You are advised to show your workings. [4] (c) Explain the likely impact on the price of taxi journeys resulting from the trends shown in Extracts A and B. [4] (d) Uber planned to carry out an extensive advertising campaign across the UK in 2016. Discuss the possible impact on Uber's demand curve from this advertising campaign. [8] (e) Assess how a small private hire vehicle firm could compete successfully in the taxi market. [8] (f) Differentiate between price elasticity of demand, income elasticity of demand and cross elasticity of demand, and analyse the importance of such elasticities for firms like Uber in their day-to-day management decisions. [14] TOTAL [40 MARKS]