Question

suppose that the price of basketball tickets at your college is determined by market forces. currently the demand - supply schedules are as follows:
price qd qs
4 10,000 8,000
8 8,000 8,000
12 6,000 8,000
16 4,000 8,000
20 2,000 8,000
a. draw the demand curve to supply curve. what is unusual about this curve? why might this be true?
b. what is the equilibrium price of quantity of tickets?
c. your college plans to increase total enrollment next year by 5,000 students. the addition students will have the following demand schedule:
price qd
4 4,000
8 3,000
12 2,000
16 1,000
20 0

Explanation:

Step1: Identify equilibrium in part b

Equilibrium occurs where quantity - demanded (QD) equals quantity - supplied (QS).
From the first table, when price = 8, QD = 8000 and QS = 8000.

Step2: Combine demand schedules in part c

For the new situation, we need to add the new demand from the additional students to the original demand at each price level.
For price = 4: Original QD = 10000, New QD from additional students = 4000, Total QD = 10000 + 4000=14000, QS = 8000.
For price = 8: Original QD = 8000, New QD from additional students = 3000, Total QD = 8000 + 3000 = 11000, QS = 8000.
For price = 12: Original QD = 6000, New QD from additional students = 2000, Total QD = 6000+ 2000 = 8000, QS = 8000.
For price = 16: Original QD = 4000, New QD from additional students = 1000, Total QD = 4000 + 1000=5000, QS = 8000.
For price = 20: Original QD = 2000, New QD from additional students = 0, Total QD = 2000+0 = 2000, QS = 8000.
The new equilibrium occurs at price = 12 where Total QD = 8000 and QS = 8000.

a. To draw the demand and supply curves:

• The demand curve will be a downward - sloping line. Plot the points (4, 10000), (8, 8000), (12, 6000), (16, 4000), (20, 2000) for the original demand. The supply curve is a vertical line at QS = 8000 for all prices shown. What is unusual is that the supply curve is vertical. This might be true because the number of seats in the basketball arena is fixed in the short - run, so the quantity supplied does not change with price.

b. The equilibrium price is 8 and the equilibrium quantity is 8000.
c. The new equilibrium price is 12 and the new equilibrium quantity is 8000.

Answer:

a. Unusual: Supply curve is vertical. Reason: Fixed arena capacity in short - run.
b. Price = 8, Quantity = 8000
c. Price = 12, Quantity = 8000