(TCO B) The supply and demand schedules for tickets to basketball games in town
ID: 1192437 • Letter: #
Question
(TCO B) The supply and demand schedules for tickets to basketball games in town of Oakwood are given in the table below. (20 points) Price Quantity Demanded Quantity Supplied $6 3,000 3,000 7 2,500 3,000 8 2,000 3,000 9 1,500 3,000 10 1,000 3,000 The stadium owners need to find the optimum price for the games. (Part A) What are the coefficients of elasticity of supply and demand if the price is raised from $6 to $8? (8 points) (Part B) Characterize the demand and supply for tickets based on the calculated elasticities. (4 points) (Part C) What is the optimum price that the stadium owners can set for the tickets? (4 points) (Part D) Why is the selected price for the tickets better than other prices given in the table above? (4 points)
Explanation / Answer
Elasticities of demand = percent change in quantity/percent change in price
Between prices 6 to 8 quantity demanded changes 3000 units to 2000 units.Thus elasticity of demand = {(2000 - 3000)/2000}*100 / {(8 - 6)/6}*100
(-1000/3000) / (2/6)
= -1.
Elasticity of supply = percent change in supply / percent change in price
{(3000 - 3000)/3000} / {(8 - 6)/6} = (0 /3000) / (2/6) = 0.
According to the value of ed and es we can classify demand as unit elastic and supply as perfectly inelastic.
Optimum price set by firm is $6.At this price the quantity of tickets demanded is equal to quantity supplied.Thus there would be no excess demand or excess supply at this price and the markets gets cleared.
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