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rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Comfytown has finally made tax arrangements with Airbnb to levy a s30-per-room tax on rentais. However, now the market conditions have changed. More hosts have now entered the Airbnb market, and awareness of this hotel alternative has increased demand. The following graph shows the demand and supply curves for Airbnb rentals in 2018. Use the green rectangle (triangle symbois) to illustrate the area representing the revenue raised by a $30-per-room tax. Then use the black point (cross symbol) to shade the area representing the deadweight loss generated by this tax. 200 Qemandge 190 Tax Revenue 180 170 Tax Wedge Supply gona Deadweight Loss 140 150 140 130 120 110 100 80 100 120 140 100 RENTALS (Rooms per day) 40 0 200 The demand for Airbnb rooms has not only shifted to the right, but it has also become relatively more v elastic since 2000. PRICE (Dolars per rental)

rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Comfytown has finally made tax arrangements with Airbnb to levy a s30-per-room tax on rentais. However, now the market conditions have changed. More hosts have now entered the Airbnb market, and awareness of this hotel alternative has increased demand. The following graph shows the demand and supply curves for Airbnb rentals in 2018. Use the green rectangle (triangle symbois) to illustrate the area representing the revenue raised by a $30-per-room tax. Then use the black point (cross symbol) to shade the area representing the deadweight loss generated by this tax. 200 Qemandge 190 Tax Revenue 180 170 Tax Wedge Supply gona Deadweight Loss 140 150 140 130 120 110 100 80 100 120 140 100 RENTALS (Rooms per day) 40 0 200 The demand for Airbnb rooms has not only shifted to the right, but it has also become relatively more v elastic since 2000. PRICE (Dolars per rental)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please redo the graphs because I don't believe they are correct as well as the box that says "more". 

The following graph shows the supply and demand curves for Airbnb rentals in the hypothetical economy of Comfytown in 2010, two years after Airbnb launched; the equilibrium quantity of rentals was 80 rooms per day, and the equilibrium price was $140 per room. At that time, Comfytown was enforcing tax regulations on the market for hotels, but it hadn’t yet initiated a tax arrangement on room rentals through Airbnb. On the following graph, use the green rectangle (triangle symbols) to indicate the tax revenue the government could have collected in 2010 if it had levied a $30-per-room tax on Airbnb rentals. (*Note: You will not be graded on your placement of this area on the graph.*) **Graph Description:** - **Axes:** - Horizontal axis (X-axis): RENTALS (Rooms per day), ranging from 0 to 200. - Vertical axis (Y-axis): PRICE (Dollars per rental), ranging from 0 to 200. - **Curves:** - **Demand Curve (2010):** Downward sloping, indicating that as price decreases, the quantity demanded increases. - **Supply Curve (2010):** Upward sloping, indicating that as price increases, the quantity supplied increases. - **Equilibrium Point:** - Located where the demand and supply curves intersect at 80 rooms per day and a price of $140 per room. - **Potential Tax Revenue:** - Represented by a shaded green rectangular area, marked by triangle symbols, indicating the area where tax revenue could be collected with a $30-per-room tax. - At $30 above the equilibrium price, the new price would be $170, extending vertically from the equilibrium quantity to the upper price level. This graph helps illustrate how taxation could affect the rental market, influencing both the price and quantity of rentals.
Transcribed Image Text:The following graph shows the supply and demand curves for Airbnb rentals in the hypothetical economy of Comfytown in 2010, two years after Airbnb launched; the equilibrium quantity of rentals was 80 rooms per day, and the equilibrium price was $140 per room. At that time, Comfytown was enforcing tax regulations on the market for hotels, but it hadn’t yet initiated a tax arrangement on room rentals through Airbnb. On the following graph, use the green rectangle (triangle symbols) to indicate the tax revenue the government could have collected in 2010 if it had levied a $30-per-room tax on Airbnb rentals. (*Note: You will not be graded on your placement of this area on the graph.*) **Graph Description:** - **Axes:** - Horizontal axis (X-axis): RENTALS (Rooms per day), ranging from 0 to 200. - Vertical axis (Y-axis): PRICE (Dollars per rental), ranging from 0 to 200. - **Curves:** - **Demand Curve (2010):** Downward sloping, indicating that as price decreases, the quantity demanded increases. - **Supply Curve (2010):** Upward sloping, indicating that as price increases, the quantity supplied increases. - **Equilibrium Point:** - Located where the demand and supply curves intersect at 80 rooms per day and a price of $140 per room. - **Potential Tax Revenue:** - Represented by a shaded green rectangular area, marked by triangle symbols, indicating the area where tax revenue could be collected with a $30-per-room tax. - At $30 above the equilibrium price, the new price would be $170, extending vertically from the equilibrium quantity to the upper price level. This graph helps illustrate how taxation could affect the rental market, influencing both the price and quantity of rentals.
### Understanding the Impact of a Room Tax on Airbnb Rentals In response to the rising potential for increased tax revenue, government officials in Comfytown explored options to align Airbnb rentals with hotel stays for tax purposes. By 2018, Comfytown implemented a $30-per-room tax on these rentals. This change accompanied an evolving market, as more hosts entered the Airbnb scene, increasing demand. The graph below illustrates the supply and demand curves for Airbnb rentals in 2018. #### Graph Explanation: - **Axes**: - The horizontal axis represents the number of rentals (rooms per day), ranging from 0 to 200. - The vertical axis shows the price in dollars per room, ranging from $100 to $200. - **Curves and Lines**: - The **Demand Curve (Demand2018)** is depicted as a downward-sloping blue line, indicating the relationship between price and quantity demanded. - The **Supply Curve (Supply2018)** is an upward-sloping orange line, showing how quantity supplied increases with price. - A vertical dashed black line indicates a shift in quantity due to the tax. - **Tax Impact**: - The area marked by green triangle symbols represents **Tax Revenue**, indicating the revenue generated by the $30 tax. - The area shaded with black point symbols shows **Deadweight Loss**, representing the efficiency loss due to the tax, as some mutually beneficial transactions no longer occur. #### Key Observations: - The demand for Airbnb rooms has shifted to the right and become more elastic since 2000. This means that the responsiveness of quantity demanded to price changes has increased, reflecting the growing awareness and popularity of Airbnb rentals. This analysis aids in understanding the economic implications of taxing Airbnb rentals and the resultant shifts in market equilibrium.
Transcribed Image Text:### Understanding the Impact of a Room Tax on Airbnb Rentals In response to the rising potential for increased tax revenue, government officials in Comfytown explored options to align Airbnb rentals with hotel stays for tax purposes. By 2018, Comfytown implemented a $30-per-room tax on these rentals. This change accompanied an evolving market, as more hosts entered the Airbnb scene, increasing demand. The graph below illustrates the supply and demand curves for Airbnb rentals in 2018. #### Graph Explanation: - **Axes**: - The horizontal axis represents the number of rentals (rooms per day), ranging from 0 to 200. - The vertical axis shows the price in dollars per room, ranging from $100 to $200. - **Curves and Lines**: - The **Demand Curve (Demand2018)** is depicted as a downward-sloping blue line, indicating the relationship between price and quantity demanded. - The **Supply Curve (Supply2018)** is an upward-sloping orange line, showing how quantity supplied increases with price. - A vertical dashed black line indicates a shift in quantity due to the tax. - **Tax Impact**: - The area marked by green triangle symbols represents **Tax Revenue**, indicating the revenue generated by the $30 tax. - The area shaded with black point symbols shows **Deadweight Loss**, representing the efficiency loss due to the tax, as some mutually beneficial transactions no longer occur. #### Key Observations: - The demand for Airbnb rooms has shifted to the right and become more elastic since 2000. This means that the responsiveness of quantity demanded to price changes has increased, reflecting the growing awareness and popularity of Airbnb rentals. This analysis aids in understanding the economic implications of taxing Airbnb rentals and the resultant shifts in market equilibrium.
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