Question

Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows:


price($) Quantity Demand Quantity Supply
4 10,000 8000
8 8,000 8000
12 6,000 8000
16 4,000 8000
20 2,000 8000

a. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true?
b. What are the equilibrium price and quantity of tickets?
c. Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule:

price($) Change in Q. Demand
4 4000
8 3000
12 2000
16 1000
20 0

Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

Answer 1

a. The demand curve is a downward-sloping line, and the supply curve is a horizontal line, so it is perfectly elastic. It might be true in the long run, when all costs and inputs are variable.

b. The equilibrium price is $8 and the equilibrium quantity is 8000 tickets.

c. The new equilibrium price is $12 and the equilibrium quantity is the same 8000 tickets.