Why assume the rides for taxis at daytime will be higher than the demand?

Question

The solution doesn't restrict the number of rides during daytime to the available demand. The total demand during daytime is 8.4 million and the daytime capacity is13.787.000 rides per year. The solution assumes that all the daytime capacity will be sold...

If we cap the daytime trips to the demand, the total revenue drops to $227,6 M per year and the total profit to -$13.7M in Y1 (with a negative ROI) changing the conclusion of the case.

Answer 1

Hello Benjamin,

Please notice what is written in the yellow part:

"Keep in mind that this calculation implicitly assumes a 100% utilization which is alright for simplicity's sake. But it is actually not correct since supply exceeds demand in the daytime shift."

I think this part clarifies your doubt.

During real interviews you could be in the same situation, wondering to which grade of detail you should deep dive the case. The best thing is to always state your reasoning to your interviewer and make clear that you have thought about this potential complication.
It's then up to your interviewer to choose if and how you can simplify the case or not.

Hope it helps,
Luca

Answer 2

Dear, Thank you for your question. Please note that your annual recurring profit is not $31.2 million (it's only for... (read entire answer)

Dear, Thank you for your question. Please note that your annual recurring profit is not $31.2 million (it's only for the first year); instead, starting from Year 2 onwards, tota... (read entire answer)