Question

All the mountain biking trails in the Northeast Kingdom are on private land, and rely upon permission from landowners. What would happen to the market for rental bikes if 20% of landowners revoked permission for trail use because of overcrowding and littering?

Graph the market for rental bikes. Put quantity of rental bikes on the horizontal axis and price of bikes on the vertical axis.

Show and describe in words what happens to demand, supply, price and quantity demanded.

Describe what will likely happen to the bike rental owner’s total income.

Answer 1

It is the situation where due to the revoke on 20% of trail use, supply is decreased here and demand is same.

So when the supply decreases, and there is no change in demand, there is a leftward shift of the supply curve.

Due to the decrease in supply, an excess demand is created at the old equilibrium level.

This is the reason for an increase in competition among the riders. So the price will increase.

Quantity demanded will be decreased. It is shown in the graph.

And thus the rest 80% land owners will get extra profit.

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