Realizing that there is a great potential for increased tax revenue, government officials in Homeyville began discussing how they could align Airbnb rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Homeyville has finally made tax arrangements with Airbnb to levy a $40-per-room tax on rentals. 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 symbols) to illustrate the area representing the revenue raised by a $40-per-room tax. Then use the black point (cross symbol) to shade the area representing the deadweight loss generated by this tax. ? 200 190 Tax Revenue

Realizing that there is a great potential for increased tax revenue, government officials in Homeyville began discussing how they could align Airbnb rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Homeyville has finally made tax arrangements with Airbnb to levy a $40-per-room tax on rentals. 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 symbols) to illustrate the area representing the revenue raised by a $40-per-room tax. Then use the black point (cross symbol) to shade the area representing the deadweight loss generated by this tax. ? 200 190 Tax Revenue

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 10E

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