Business (AS & A Level) · May / June 2021 · Paper 21 · Question 1

Ray’s Taxis (RT) Ray is a sole trader providing a taxi service in city L. Recently, demand for Ray’s taxi has fallen due to an increase in the number of competitors. Ray is thinking of joining Summus, who offer a smartphone app (application) which connects passengers to taxi drivers. Ray would be the first taxi driver in city L to join Summus. The app uses dynamic pricing to set the fare (amount paid) for a journey. Summus takes 20% of the fare and the remaining 80% is revenue for the taxi driver. Summus has provided forecast data in Table 1.1. Table 1.1: Forecast data about each taxi using the Summus app Average fare $15 Average number of journeys per day 16 Average distance travelled per journey 5 km Ray has calculated costs, shown in Table 1.2. Table 1.2: Ray’s costs $ Fixed cost per day 42 Variable cost per km 0.50 Passengers like the Summus app as it is easy to use, quick and reliable. Taxi drivers like it as they can decide when and where to work and they can earn more revenue. However, a recent article on a taxi drivers’ forum suggested there are problems with Summus. • It signs up too many taxi drivers. • Taxi drivers are not employed by Summus and are not guaranteed any revenue. • Customers have to wait longer for a taxi when fares are low. 5 10 15 20

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