Question

The New York Yankees baseball team wishes to determine the equilibrium price for seats. The supply of seats at the ballpark is fixed at 40,000.

Price	Quantity demanded in year 1	Quantity supplied
$100	50,000	40,000
$110	45,000	40,000
$120	40,000	40,000
$130	35,000	40,000
$140	30,000	40,000

1. Calculate the price elasticity of supply.
2. Calculate the price elasticity of demand when price increases from $120 to $130. Is the demand price elastic? Explain.
3. Determine the equilibrium price and equilibrium quantity.
4. Suppose the stadium is undergoing a renovation, the number of seats decreases by 10,000.

1. Determine the new equilibrium price.
2. Draw a graph to show the change in the equilibrium price and equilibrium quantity.

Answer 1