Supply And Demand of Free Parking Spots on a Beach

Question

Using supply and demand analysis (graphs), explain why there is some days a surplus of parking spots available at the beach and other times there is a shortage of such parking spots.  Assume parking at the beach is free of charge.  Your graphs should clearly identify all relevant points.

Answer 1

Hello Omar,

First off, we must realize that there are a fixed amount of parking spaces. This will make the Supply Curve Vertical (straight up and down) at the point where QS= the number of parking spaces, lets just say 100 spaces, so QS = 100 and is vertical from there.

Now the demand is free of charge, so the demand curve is horizontal at price = $0, to make this easier to read, I would put the $0 above the X-Axis. So you should now have a graph that looks like a cross with only straight lines.

On some days, when there are 100 or fewer people show up, there is a surplus of spaces i.e. QS is larger than QD. On other days, when 101 or more people arrive, there is a shortage i.e. QD is larger than QS.