Chapter 3, Problem 11P

To determine

To Explanation:

The questions based on the given situations.

Fans of music often bemoan the high price of concert tickets. One rock superstar has argued that it isn’t worth hundreds, even thousands, of dollars to hear him and his band pay. Let’s assume this star sold out arenas around the country at an average ticket price of $75.

1. How would you evaluate the argument that ticket prices are too high?
2. Suppose that due to this star’s protests ticket prices were lower to $50. In what sense is this price too low? Draw a diagram using supply and demand curves to support your argument.
3. Suppose the superstar really wanted to bring down ticket prices. Since he and his band control the supply of their services, what do you recommend they do? Explain using a supply and demand diagram.
4. Suppose the brand’s next album was a total dud. Do you think they would still have to worry about ticket prices being too high? Why or why not? Draw a supply and demand diagram to support your argument.
5. Suppose the group announced their next tour was going to be their last. What effect would this likely have on the demand for and price of tickets? Illustrate with a supply and demand diagram.

Concept Introduction:

Demand: The demand is defined as the ability to pay for goods and services.

Supply: The supply is the ability of the seller to produce the goods and services and sell it at the prevailing price

Equilibrium price: The equilibrium price is at which the demand and supply are equal