Exercise: Elasticity
Read the article ”Super Bowl XLVIII Pricing: A Lesson In
- Draw two demand curves of tickets for two Super Bowls – XLVIII closed to NYC, and XLVII in New Orleans. Which demand curve is more elastic?
(Hint: You don’t need to show the scales on coordinates. One demand curve is steeper than the other one.)
2. What are the reasons that the demand in one market is more elastic to price changes (i.e., flatter demand curve) than the demand in the other market? (Provide at least two reasons)
3.From the article, “In general, teams charge too low a price to maximize ticket revenues.” Why teams should charge a higher price to raise their revenues? Please draw a graph with the demand curve to support this argument. (Hint: mark the areas of revenues before and after the price rise on your graph.)
4. After a 1-15 season in 2016, the Cleveland Browns dropped the cost of 40% of their season ticket to as low as $5 per game. Why the Browns lowered the price to boost their revenue? Please draw a graph with the demand curve to support this argument. (Hint: mark the areas of revenues before and after the price drop on your graph.)
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