Economic 2302

Question 1

A relatively new aspect to the marketplaces of a number of cities worldwide is something called the sharing economy, in which people rent assets such as cars and rooms directly from each other. Also called a peer-to-peer economy, these transactions are generally conducted via the Internet from dedicated Websites or mobile apps. Two of the faster-growing companies in this sharing economy are Uber, which is a ride-sharing service, and Airbnb, which helps travelers find lodging away from the traditional hotel market. Do some research on these two companies and the sharing economy in general and then address the following:

– Discuss the sharing economy from a supply and demand standpoint. How do companies like Uber and Airbnb affect supply and demand in the markets for shared rides (taxis, limos, etc.) and rented rooms, respectively?

– Why do you think these two companies continue to grow and remain successful?

– Some cities have fought to prevent companies like Uber and Airbnb for being able to conduct business. Explain why cities would do this, and discuss whether you agree or disagree with these cities. (Look up the city of Dallas and its ongoing entanglement with Uber.) – Explain who benefits and who loses when sharing-economy companies like Uber and Airbnb are allowed to operate.

– Also, feel free to entertain me and your classmates with any additional interesting information you have uncovered with respect to the sharing economy and how it relates to topics covered in this class.

Question #2

The American Recovery and Reinvestment Act of 2009 (ARRA) was passed by President Obama and Congress in response to the recession of 2007-2009. The primary components of this bill included tax cuts and increased government spending, with an emphasis on infrastructure spending such as roads and bridges. Included in the bill was a “Buy American” provision which required all manufactured goods (a few exceptions did apply) purchased with ARRA funds to be made in the United States. The intention of this provision was to increase jobs in the United States by preventing foreign companies from reaping the rewards of the new spending projects.

a. Are attempts to protect U.S. firms from foreign competition, such as the Buy American provision, good ideas? Explain.

b. Explain why some American companies might be opposed to this provision.

c. Explain whether or not you believe the Buy American provision would create jobs in the United States.

d. What do you think will be the economic consequences of a Buy American provision?

e. Do you believe the government should get involved in this aspect of private business, even when the available funds are coming from the government? If so, why? If not, why not?