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Using demand and supply analysis, supported by diagrams, explain why there may be a misallocation of...

Using demand and supply analysis, supported by diagrams, explain why there may be a misallocation of resources in the pricing that occurs in the primary market for ticket sales for events where demand outstrips the available supply. Word limit - 160 words

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Answer #1

The supply-demand model is one of the basic concepts of economics. The price level of a good is decided by the point at which quantity supplied equals quantity demanded.
Resource misallocation explains a situation in which capital and labor are not properly distributed so that less productive firms receive a huge share of capital and labor than they should according to their level of productivity. Such misallocation presents in the presence of deformation.
Reasons for misallocation of resources in the pricing that occurs in the primary market for tickets sales for events where demand outstrips the available supply are following:-

1. Monopoly power of firms,
2. Market imperfections,
3. Market frictions,
4. Captital and labour are not properly used
5. Producers get the different prices for the tickets
6. Price ceiling.
Diagram:-

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