Realizing that there is a great potential for increased tax revenue, government officials in Hosttown began discussing how they could align Airbnb rentals with hotel stays from a tax perspective. Fast-forward to 2018, at which time Hosttown 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