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Ten million tourists visited New Orleans in 2004.However, in 2005, Hurricane Katrina damaged many parts of New Orleans and disrupted the tourist business in the
Ten million tourists visited New Orleans in 2004.However, in 2005, Hurricane Katrina damaged many parts of New Orleans and disrupted the tourist business in the years thereafter. Only 3.7 million tourists visited New Orleans in 2006 and 7.1 million in 2007. Subsequent hurricanes also discouraged tourist visits, but the number of tourists slowly grew back to the pre-Katrina level by 2013 (http://www.crt.state.la.us). Use a supply-anddemand diagram to show how a hurricane affects the tourism demand curve and hence the equilibrium price and quantity. Indicate the magnitude of the likely equilibrium price and quantity effects. Show how the answer depends on the shapes of the supply and demand curves. (Hint: What is the shape of the supply curve of hotel rooms when the city is at full capacity?)
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