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Production for private-hire cars will increase. Most of these private-hire vehicles were converted from private passenger cars. This also includes normal rental cars. The authorities allowed unsold second-hand cars to be converted to rental cars a decade ago. Rental cars can be converted back to normal cars. Demand is also high for chauffeur service and the companies will wan to do their best to meet these demands. Hence, it is very attractive to increase production of private-hire cars. However, it is advisable to be cautious in production as diminishing marginal returns will set in and cut production when marginal returns becomes negative.

Costs increase with more and more private-hire cars and companies lose the opportunity to earned revenue when some of the cars are not used due to not enough drivers. This could cost the companies to incur losses instead of earning profits. Even if all cars are used to the maximum, due to the law of diminishing marginal returns, there will be overcrowding and congestion which will result in negative marginal profits and ultimately also cause the company to incur loses.

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ok,  your chosen market is taxi service. That's good.

Don't forget to include the market structure in your analysis.

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The first determinant is availability of substitutes. The greater the number of substitutes available, the more price elastic the demand for a good will be. For taxis, there are a number of substitutes such as other companies taxi such as  citycab, comfort etc, there are also  private cars, e-scooter, walking or cycling, hence it is more price elastic.

The second determinant is proportion of income spent on a good. For taxis, consumer spent less on it, hence it is less price elastic.

The third determinant is time period. The greater the time period , the more price elastic. If consumers are given more time to search for other ways of travelling, taxi will become more price elastic.

The fourth determinant is habit. If the good is consumed habitually, in this case, the person always takes the chauffeur-driven private hire cars then the demand of it will be more price inelastic.
The fifth determinant is necessity vs luxury. The chauffeur-driven private hire cars are considered as a luxury so the demand of the good will be more price elastic.

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http://www.straitstimes.com/singapore/transport/private-hire-cars-outnumber-taxis-by-a-mile

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Over the past 4 years, the supply of private-hire cars has increased by 70 times. It is now 1.5 times of the number of taxis. Initially, there were less than 500 private-hire cars, before Uber and Grab came along. Thus, the increase in supply came along due to an increase in the number of suppliers in the market. In 2015, the supply of private-hire cards reached 10,000 and this year, it reached 30,000. As of April 2017, there are 56% more private-hire cars than taxis, many of which converted their cars to private-hire cars. With so many taxis and private-hire cars available, the market is well oversupplied. This lead to intense competition and if the company's practices is unsustainable, it would affect the economy negatively.

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Supply of taxis will decrease as more taxis will leave the taxi firms. The firms hence have to deal with the problem of empty cares and lower revenue. On the other hand the supply of private cars will increase.

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http://www.straitstimes.com/opinion/st-editorial/supply-awaits-demand-on-the-road

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There is an increase in un-hired taxis from 4.2% in 2015 to 5.9% in 2016. The supply of taxi increases from 1190 to 1620. The increase in supply will shift the curve rightward. There is an ample supply of taxis on a rainy day so the supply of taxi increases. This will also make the supply curve shift rightward. This is caused by the factor of number of sellers, in this case, number of taxi drivers. If there is an increase in the number of taxi drivers available, there will be an increase in the supply of taxi.

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The concept of market equilibrium states that the forces of market supply must balance that of market demand.  Due to the oversupply of taxis and private hire chauffeurs, when private hire-chauffeurs just hit the market as a profitable source of income in 2014 (Fallacy of composition misconception), the quantity demanded now is less than the quantity supplied. In order to achieve market equilibrium, the number of taxis have seen a decline to match quantity demanded.The average rate of taxis that were unhired was 5.9 percent for the first 11 months of last year, up from 4.2 percent in 2015.

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Taxis and private chauffeur services

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The determinant that is involved is the "Taste and Preferences"
The private hire cars has an advantage that is convenient to customers. Customers can see when their ride is coming, and they know how much the fare is going to be. And the drivers know they are being graded, so they are more mindful about service. However, for Taxis, customers may not know how much is their fare and they are unable to give feedback and rate the driver if he provides a good or bad service.

Substitution effect is involved as the price of the taxi fare increases, customers will reduce their choice to ride a taxi, and take the chauaffeur-driven private-hire car as an alternative which are relatively cheaper. As a personal customer of private-hire cars myself, it is cheaper in price and there is also an advantage of discounts that was being implement.

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The average rate of unhired taxis has increased from 4.2% to 5.9% from 2015 to 2016. There is also an increase in the number of brand new cars lying around in carparks due to private-hire services. As more taxis are left unhired, more taxi drivers would leave their taxi firms. As for private-hire services, even if their earnings increase, they would have to work longer hours for it. This would lead to a change in various surcharges in order to achieve market equilibrium between demand and supply. If the economy was to take a negative turn, the taxi industry would get affected as retrenched workers would turn to driving to earn money as they find another job, leading to more taxi drivers and lesser unhired vehicles. But this could also lead to lesser people wanting to use taxis as they want to save their money. As for snow, drivers need to improve their services so as to attract more passengers.

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The demand for private chauffeur driven cars has increased in the recent years due to ease of usage (Fixed pricing and knowing when the driver will come). Lowering the demand for taxis. Furthermore, this has increased the supply for such private chauffeur cars, with an increase in the number of rental cars being converted due to the incentives put out by Grab and Uber.

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Newspaper Article 1: (Production and Cost)

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Newspaper Article 1: (Production and Cost)

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As more taxis and private car hires drivers are in the market, the firm will receive diminishing marginal returns. The contribution of an additional worker slowly declines , hiring more workers increases total product by smaller and smaller amounts. This is caused by the congestion and overcrowding of fixed resources by too many variable (No. of workers and cars and taxis). At a certain point total product declined due to too much overcrowding and congestion in the market, and there are many unhired taxis around.

Also, as number of worker increases, diminishing marginal returns kicks in and each individual worker will earn lesser than the previous one, due to the fact that their earnings is proportionate to their revenue to the company. At a certain point the revenue and earnings is insufficient for the taxi drivers to support themselves and their family and they will leave the firm in search of other jobs. This causes many taxis to be empty and is left idling around in the taxi companies.

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The first determinant is proportion of income spent on the taxi fare. The proportion of income spent on the taxi fare is not much so it will be less price elastic the demand for the good will be. The second determinant is availability of substitutes. The number of substitutes available are great, some examples are taking a bus, walking or cycling. So the demand of the good will be more price elastic. The third determinant is habit. If the good is consumed habitually, in this case, always taking the taxi then the demand of the good will be price inelastic. The fourth determinant is time period. The greater the time given to a person to switch from taxis to other transportation, the more price elastic the demand of the good will be. The price elasticity increases over time. The fifth determinant is necessity vs luxury. Taxi are considered as a luxury so the demand for the taxi will be more price elastic.

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Demand of taxis will decrease as ride-hailing apps such as Uber and Grab are often significantly lower.  This happens because customers are less willing and able to pay the price for the taxi. The factor affected in this case is the price of related good. When the price of substitute increases, the quantity demanded of the good in question(substitute) decreases, whereas the demand for the other good increases. When the price of a complement increases, the quantity demanded of the good in question decreases. The other good which is the complement will also decrease.

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in the article, it stated that the number of private chauffeur driven cars has increase by nearly 70 times since Uber and Grab entered into the economy. The increase of the number of rental cars being converted in to private chauffeur driven cars was to help to cater to peak-hour demand unfulfilled by traditional taxis.

income effect is involved as the prices of the taxi fare increases, with the same amount of money, consumers can only take a few taxi rides as compared to chauffeur driven private cars. Consumers they are able to take more chauffeur driven private cars because they are cheaper compared to taxis.

one of the determinant is the price of the related goods. there are substitutes for taxis which is the private chauffeur driven cars. when there is an increase in the price of the taxis, there will be a fall in quantity demanded of taxis, ceteris paribus. This will lead to an increase in demand for private chauffeur