Question

Reflecting on the product or service at a Hotel discuss the law of supply and demand. How the increase of decrease of the demand affect the supply?

Answer 1

Law of demand:

There is an inverse relationship between the price of hotel room and quantity of such service (making the other factors like income of consumers, change of taste, etc. remaining constant) – at an increasing price (rent) there is a decreasing demand of such room; and vice versa.

Effect on supply:

Supply is unaffected by demand.

Since the supply curve is parallel to vertical axis, demand can’t influence the quantity of supply; but it increases/decreases price – if the demand is high the price would be high; and vice versa.