Question

Explain the effect of sharing economy in terms of economic theory.

Answer 1

Economic theories try to explain economic phenomena. That means, it help to explain specific situations or problems in the economy of some of its models. And these models of economic systems helps to explain the situation and find solutions based on different approaches that are typical of the economic theory. The sharing economy in terms of economic theory is an economic model defined as P2P (peer-to-peer) based activity of acquiring, providing or sharing access to goods and services.

Sharing economy is growing fastest in the present scenario . Sharing economy describes the way of sharing or distributing goods and services. It is an economic system in which assets are shared between private individuals for free or for a fee. It involves short term peer-to-peer transactions to share use of assets and services . It is mostly based on online media. And it allow people to make money from underused assets. In sharing economy almost everything can be shared for example: cars, accommodation, bicycles, meals etc. And the biggest firms involving in sharing economy are Uber, Air BnB, Didi Kuadidi.

The effects of sharing economy can be distinguished in two ways, merits and demerits.

Merits:

• Increases society value of social connections and local community .
• Technology sharing.
• It helps to save money and get money.
• New jobs and new form of self-employment .
• It increases online trust, offline sharing and offline trust.
• Increases the opportunity for the government to implement good policies.
• High competition keeps prices low.
• Choice for consumers will be more.
• More job investment.

Demerits:

• It bears risk of fraud and scams.
• The sharing economy has contributed to a new form of capitalism .
• Lack of consumer loyalty. They can jump from one product to other.
• In some situations service is often expensive.
• Lack of regulation to oversee products.