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Top Principle

People gain from voluntary trade:

Economic Enigma Presentation

Taxi drivers are willing to trade a fixed fee in order to gain more money from being permitted to work. The taxi drivers cooperate with the taxi companies by paying a fixed amount for a taxi medallion in order to work and drive a cab. Taxi drivers trade in order to gain more profit by working which includes wages and tips.

Stephanie Le & Theresa Nguyen

Data/ Graph

Principles of Economic Thinking

Everything has a cost:

Taxi drivers have the explicit cost of the imposing fixed fee, as well as the implicit cost of time and energy.

Taxi Medallion: a permit issued by the government that is required to drive a cab in most cities in America.

People create economic systems to influence choices and incentives:

The government issues a limited amount of taxi medallions to taxi companies, therefore the job is a competitive market. Taxi companies have tremendous power over their employees, in which they are able to charge numerous expenses on them.

People gain from voluntary trade:

Taxi drivers are willing to trade a fixed fee in order to gain more money from being permitted to work.

Cited Sources

http://blog.priceonomics.com/post/47636506327/the-tyranny-of-the-taxi-medallions

Why do taxi drivers pay a fee in order to use the taxi cab?

  • This is considered unconventional because taxi drivers have to pay for the right to work.
  • Conventional wisdom would explain that people should not have the incentive to pay a fee in order to work because people choose to work in order to gain money as opposed to losing it when they pay a fee.
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