Learn With Elaine: Uber’s Driver Shortages

The demand and supply sides of markets responded differently to pandemic shortages.

Econlife Blog

https://econlife.com/2021/06/ubers-driver-shortage/

Fact Questions:

1. According to Uber, on which day are we most likely to lose jewelry? Backpacks? Birthday gifts?
2. According to Uber, what is the most forgetful city in the U.S.?
3. According to Uber, which item do people most frequently leave behind?
4. As the pandemic intensified, by how much did Uber’s customers diminish their demand for rides?
5. How did Uber’s drivers respond to the pandemic?
6. When the pandemic subsided, what problems did Uber’s riders start to experience?

The Economic Idea: A Demand and Supply Problem

Markets have a demand and a supply side. You and I usually create demand for a good or a service when we are willing and able to buy it. With Uber, we boost demand when we schedule a driver and accept the driver’s price. Meanwhile, supply comes from the producers of goods and services. It comes from the drivers that supply the rides. Typically, the people on the demand side prefer lower prices while producers hope that higher prices will provide more profit.

As the pandemic diminished, demand for rides soared. However, drivers were returning to the market more slowly.

The result was driver shortages and longer waits for riders. To minimize those delays, Uber needed more drivers. That meant they had to pay them more because the supply side is willing and able to increase what it produces when price is up.

But riders do not want to pay. They just want more drivers. And that is the problem.

Activity Goal: To consider the demand and supply sides of pandemic shortages.

Procedure: A small group exercise.

1. In class, remotely, or at home, divide into pairs or small groups of 3 to 5 people.
2. Each of the following items had shortages during the beginning or end of the coronavirus pandemic. Select one:

• toilet paper,
• hand sanitizer,
• Heinz ketchup packets,
• semi conductor chips (used in cars and appliance and video games),
• hand weights
• Uber drivers

3. Within your smaller group, decide who will represent demand for the item you selected and who will reflect its supply side.
4. The demand side should explain how they responded to the shortage of the item they selected.
5. The supply people should explain how they responded to the shortage of the same item.
6. Decide if the demand side or the supply side or both helped to solve the shortage or made it worse.
7. Re-gather as a class. Each group can share the demand and supply response to the shortage.
8. As a class, seeing how demand and supply manage shortages, explain if you believe shortages tend to disappear because of market behavior.
9. If not, do you recommend government intervention? As a class, discuss what government could do.