2 Concerts and parking prices Taylor Swift is in the Bay Area and is giving two concerts on Friday night (in Stanford) and Saturday night, in Berkeley. Taylor Swift and her team can supply up to 50,000 tickets for each night at a constant marginal cost of $100. The stadium's capacity limit is 50,000, so no more than 50,000 people can attend the concert. Now suppose that at a price of zero, 50,000 tickets would be demanded in each of the cities. At a price of $200, demand would fall to zero. Further assume that demand is linear. Note that tickets have to be purchased on the same day, between 10 and 11am. For the questions below, you can solve the problem in a graph or choose to supplement your graphical analysis with calculations (note that in this case, demand is given by QD = 50,000 - 250p). 1. Draw supply and demand in a graph with tickets on the X-axis and the price on the Y-axis. 2. What will be the price of tickets and how many tickets will Taylor Swift sell at this price each night? 3. Now suppose that everyone has to drive to the stadium alone. While everyone in Stanford had been expecting parking to be included in the price for the ticket, you actually have to pay an extra $10 for parking. However, people in Stanford are naive and do not expect to pay for parking at all, even though it has been publicly announced. What happens to the demand for concert tickets (the willingness to pay for the ticket itself)? How many people go to the concert? What will be the price for tickets?
2 Concerts and parking prices Taylor Swift is in the Bay Area and is giving two concerts on Friday night (in Stanford) and Saturday night, in Berkeley. Taylor Swift and her team can supply up to 50,000 tickets for each night at a constant marginal cost of $100. The stadium's capacity limit is 50,000, so no more than 50,000 people can attend the concert. Now suppose that at a price of zero, 50,000 tickets would be demanded in each of the cities. At a price of $200, demand would fall to zero. Further assume that demand is linear. Note that tickets have to be purchased on the same day, between 10 and 11am. For the questions below, you can solve the problem in a graph or choose to supplement your graphical analysis with calculations (note that in this case, demand is given by QD = 50,000 - 250p). 1. Draw supply and demand in a graph with tickets on the X-axis and the price on the Y-axis. 2. What will be the price of tickets and how many tickets will Taylor Swift sell at this price each night? 3. Now suppose that everyone has to drive to the stadium alone. While everyone in Stanford had been expecting parking to be included in the price for the ticket, you actually have to pay an extra $10 for parking. However, people in Stanford are naive and do not expect to pay for parking at all, even though it has been publicly announced. What happens to the demand for concert tickets (the willingness to pay for the ticket itself)? How many people go to the concert? What will be the price for tickets?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2 Concerts and parking prices
Taylor Swift is in the Bay Area and is giving two concerts on Friday night (in Stanford) and
Saturday night, in Berkeley. Taylor Swift and her team can supply up to 50,000 tickets for
each night at a constant marginal cost of $100. The stadium's capacity limit is 50,000, so
no more than 50,000 people can attend the concert. Now suppose that at a price of zero,
50,000 tickets would be demanded in each of the cities. At a price of $200, demand would
fall to zero. Further assume that demand is linear. Note that tickets have to be purchased
on the same day, between 10 and 11am. For the questions below, you can solve the problem
in a graph or choose to supplement your graphical analysis with calculations (note that in
this case, demand is given by QD = 50,000 - 250p).
1. Draw supply and demand in a graph with tickets on the X-axis and the price on the
Y-axis.
2. What will be the price of tickets and how many tickets will Taylor Swift sell at this
price each night?
3. Now suppose that everyone has to drive to the stadium alone. While everyone in
Stanford had been expecting parking to be included in the price for the ticket, you
actually have to pay an extra $10 for parking. However, people in Stanford are naive
and do not expect to pay for parking at all, even though it has been publicly announced.
What happens to the demand for concert tickets (the willingness to pay for the ticket
itself)? How many people go to the concert? What will be the price for tickets?
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