We bring back the price theory with our series about price theory problems with Professor Bryan Cutsinger. You can view the previous problem and the Cutsinger solution here and here.
Share your proposed solutions in the comments. Professor Cutsinger will be present in the reactions in the coming weeks and we will post his proposed solution shortly thereafter. May the graphs ever be in your favor and the long live price theory!
Ask: Uber offers a membership option that entitles members to a percentage reduction in the price of Uber rides. Evaluate the following two statements:
1- Suppose a Uber customer is indifferent to become an Uber member or pay the standard Uber-Rit price. This customer will never spend less and will generally spend more on Uber rides if the customer becomes a member. (Assume that Uber rides are a homogeneous.)
2- Introducing the membership option can never reduce the number of Uber rides that this customer makes.