Supply and Demand Essay

1078 Words Dec 3rd, 2013 5 Pages
Economics Unit 2: How Markets Work Investigating Price Changes Portfolio Project
Part 1: Chapter 6 Wall Street Journal Questions
1) Why are sports teams considering switching to a variable–pricing strategy for tickets?
Sports teams are switching to a variable-pricing strategy for tickets so that they can get a higher profit on games with record attendance numbers. They feel the need to do so because the marginal costs, such as construction payment and players’ salaries, did not equal to the marginal revenue, since attendance was severely dropping. To pay for the marginal cost, the sports team needed to capitalize on things that they were sure of, like increasing attendances to games between major sporting rivals.
2) What would happen
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gasoline prices have fallen to their lowest level in nearly 33 months, as Wall Street Journal reported. As a result, the demand has increased significantly to reflect the law of demand. Suppliers are stocking up extra gasoline to meet the consumers’ demands and make a higher profit. In addition, the marginal cost of food delivering companies has decreased, and the costs of these goods have also decreased to equate the marginal costs. If the gasoline prices continue to be low, there would be many new gas companies opening because businessmen would see this as a prime time to get in on the market. The consumers are benefiting from the fall of gas prices in many ways. The income effect makes them feel richer, and they therefore have spare money to spend on other goods. Furthermore, they could use this time to stock up on gas, so that they would not have to pay for it when prices increase in the future.
5) How will the change in prices affect the demand for each product?
Because it is an inelastic product, paper would remain at a high demand despite increases in prices. However, there is a possibility that someone discovers a substitution for paper over time. The demand for paper would then be lowered. A decrease in anything, especially something as commonly used as gas, would yield a higher demand because the opportunity costs are little in goods that are affordable. The consumers might even have a bit of extra cash saved to spend on

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