Question

Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows:Price Quantity Demanded (Qd) Quantity Supplied (Qs)$4 10,000 tickets 8,000 tickets$8 8,000 8,000$12 6,000 8,000$16 4,000 8,000$20 2,000 8,000Required:a. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true?b. What are the equilibrium price and quantity of tickets?c. The college plans to increase total enrollment next year by 5,000 students.

Answer 1

Answer:

a) see attached graph. There is nothing unusual with the supply curve, it is simply fixed. This happens to most services, e.g. there is a fixed number of hotel rooms available for rent, in the short run you cannot add more rooms per night if the demand increases. In order to increase the quantity supplied, you would need to build a larger hotel, or in this case, a larger stadium.

b) the equilibrium price is $8 and the equilibrium quantity is 8,000 tickets

c) if the college plans to increase enrollment, the demand might increase, leading to a higher equilibrium price, but the supply will remain the same until the stadium is expanded.

Explanation:

Price              Quantity Demanded (Qd)          Quantity Supplied (Qs)

$4                            10,000                                        8,000

$8                             8,000                                        8,000

$12                            6,000                                        8,000

$16                            4,000                                        8,000

$20                           2,000                                        8,000