Suppose that the price of basketball tickets at your college...

Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows: 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. Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule: Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

Suppose that the price of basketball tickets at your college is determined by market forces.
Currently, the demand and supply schedules are as follows: 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. Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule: Now add the old demand schedule and the demand schedule for the new students to calculate
the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

Key Concepts

Shifts in Demand

A shift in the demand curve occurs when there is a change in other determinants of demand, such as the number of consumers, consumer income, or preferences, rather than a change in the price of the good itself. When additional consumers enter the market, as illustrated by an influx of new students, the overall market demand increases, leading to a new equilibrium with a potential change in both price and quantity, assuming supply remains constant.

Inelastic Supply

An inelastic supply curve, often represented as a vertical line, indicates that the quantity supplied does not change with price. This scenario can occur due to fixed capacities or constraints in production. In such cases, even if demand changes, the quantity available in the market remains constant, influencing how prices adjust in response to shifts in demand.

Supply Curve

A supply curve shows the relationship between the price of a good or service and the quantity supplied by producers. It usually slopes upward, indicating that producers are willing to supply more at higher prices. However, in some scenarios, such as when supply is fixed due to capacity constraints, the supply curve can be perfectly inelastic (vertical), meaning that changes in price have little to no effect on the quantity supplied.

Demand Curve

A demand curve represents the relationship between the price of a good or service and the quantity demanded by consumers. It typically slopes downward from left to right, reflecting the inverse relationship between price and quantity demanded: as price decreases, consumers are willing to purchase more of the good, and vice versa. This concept is fundamental in understanding consumer behavior in competitive markets.

Market Equilibrium

Market equilibrium is the point where the quantity of a good demanded by consumers equals the quantity supplied by producers. At this point, the market clears, meaning that there is no surplus or shortage. The equilibrium price and quantity are determined by the intersection of the demand and supply curves.

Transcript

00:01 All right, here we're going to be working with the idea of market forces affecting supply and demand, and we're given an example in which we're examining the price of basketball tickets at a college being determined by its supply and demand.

00:12 So we're given two supply and demand schedules.

00:15 And we're going to start by working with this first one here.

00:18 What we want to do right away is just go ahead and graph this so we get a visual representation of it, and then we can better find what our equilibrium is as well.

00:26 So what's nice about the way that this was given to us is it's essentially just coordinate points.

00:30 So all we need to do is plot for our price each of our demand and supply.

00:35 So let's go ahead and do our demand first.

00:37 So we see that when our price is four, we sell 10 ,000 tickets.

00:41 At a price of eight, we sell 8 ,000 tickets.

00:45 Price of 12, we sell 6 ,000 tickets.

00:49 At a price of 16, we sell 4 ,000.

00:53 And at a price of $20, we sell only 2 ,000 tickets.

00:58 So that gives us our demand curve.

01:01 And connect that and that looks right.

01:03 It is downward sloping, which is what we would expect.

01:07 Let's go ahead and do our supply curve now and we can see that our supply, the quantity supplied is 8 ,000 for each and every price.

01:14 So that's telling us that we're going to have a vertical curve that looks something like this.

01:18 It's just going to be straight up for each and every price.

01:23 So there's our supply.

01:25 Now we want to determine what our equilibrium is and we can see that that sits right in here.

01:30 And we know that our quantity supplied is 8 ,000 at every single price.

01:34 So what we can really ask ourselves is what quantity is demanded at that particular price right here.

01:41 So when we are selling 8 ,000 tickets, our quantity demanded also has to be 8 ,000.

01:47 But what is that price? well, it's at 8.

01:50 And we can see that up here in our demand schedule.

01:53 When we have 8 ,000 demanded, there's also obviously 8 ,000 supplied at a price of 8.

01:58 So we can determine that our equilibrium price here is $8.

02:04 And our quantity is equal to 8 ,000.

02:10 Let's go ahead now and take a look at our second demand schedule over on the right hand side here...

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