Question

What is one specific factor that you think is likely to cause a shift in the supply curve for the good or service of the hotel industry in the next 3-5 years? Relying on the one factor you named in the previous question, represent the change (the shift) you expect using a supply diagram and explain your answer.

Answer 1

More services like Airbnb that can increase the supply of available options for the people in the market can shift the supply curve of the hotel industry to the right. It will increase the number of hotels available in the market and the new equilibrium will be at a lower price and higher quantity available.

Here, the old supply was S and the new supply is S1, with the increased supply the price dropped to P* and the new quantity is Q1.