Question

Q7. Use the table below to answer the questions that follow:
Quantity supplied                    Quantity Demanded
     Thousands              price        Thousands
              60                 $25                     80
              60                  35                      75
              60                  45                      70
              60                  55                      65
              60                  65                      60
              60                  75                      55
              60                  85                      50

a. If this table reflects the supply of and demand for tickets to a particular World Cup soccer game, what is the stadium capacity ?


b. If the preset ticket price is $45, would we expect to see a secondary market for tickets? Explain why or why not. Would the price of a ticket in the secondary market be higher than, the same as, or lower than the price in the primary (original) market?






c. Suppose for some other World Cup game the quantities of tickets demanded are 20,000 lower at each ticket price than shown in the table. If the ticket price remains $45, would the event be a sellout )بيعاً كاملاً( ? Explain why or why not.

Answer 1

a. As you can see in the table, the supply is a fixed number of 60 thousand for each price level. Hence the stadium capacity is 60,000

b. If the ticket price is $45, you can see that the corresponding demand is 70 thousand. This is called a situation of shortage, since supply is lower than demand. Some people may be willing to pay a price higher than $45 to secure a seat, and that creates a secondary market, and obviously the price in the secondary market will be higher than $45 (and lower than $65, since as you can see that at price = $65 the demand is equal to capacity)

c. What this means is that quantity demanded is 20 thousand lower for each price level. Hence it will 70-20 = 50 thousand for price = $45. This is called a surplus since supply is higher than demand. There will be 10,000 (i.e., 60,000-50,000) vacant seats and no sellout.