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NAME: Bipin KC
ID NO: 1099984
Tutors name: Hammad Siddiqui
BUS502 Principles of Economics for Accountants Semester One 2017
Assessment task 2 Responses to articles - Article 2
DUE via Safe Assign 5pm Sunday 7th May (Note this is later than in Course Outline!)

Super Bowl XLVIII Pricing: A Lesson In Demand Elasticity

by Patrick Rishe from Forbes 19 September 2013
http://www.forbes.com/sites/prishe/2013/09/19/super-bowl-xlviii-pricing-a-lesson-in-
demand-elasticity/#3635195c6b23

Access the article at the URL given above and read it carefully. Based on your reading, answer
the questions in the spaces below. Use full sentences and show all necessary working but do not
use more space than is given here. Other references are not necessary but, if you do use any (for
example, online economics glossaries) please list at least the URL of your source. Marks are
shown and total [15].

(1) Patrick Rishe claims that professional sports teams typically price their inventory in
the inelastic portion of their demand functions.
(a) What is meant by inelastic demand? If Rishe is correct, why will pricing in this
way not maximize revenue from ticket sales? [3]
Inelastic demand is that point where demand for the product does not change
relative to change in products price. In other words demand for the products
increases or decreases the price of product remains same.
Pricing in this way does not maximize revenue from ticket sales because there is
the same demand, which is caused, by the higher price for the limited number of
attendance. If there was low ticket price, there number of attendance will be high
which would leads high number of ticket sales and may automatically maximize
revenue. However it is the case of inelasticity, so the pricing in this way does not
maximizes revenue.

(b) What reasons are there for not maximizing revenue from ticket sales? [2]
There are two reasons:
High cost of ticket price
Limited number of attendance

(2) (a) Prices for two types of seats as set at two different venues are reported in the
article. Complete the table to show these prices. [1]

New York New Orleans

Club level $2600 $1250
Lower bowl $1500 $950
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(b) Why do the ticket prices in NY differ so much from those in New Orleans? [1]
Ticket price in NY differ so much from those in New Orleans because NYC is more
populated than other super bowl venues. It has the high concentration of wealthy
cooperations and individuals. There are also well-established practices in the city
of paying out of nose for marquee events.

(c) In almost all cases, there is evidence of a positive secondary price mark-up over
face. For example, many $600 tickets sold for $2,000. Explain what this means and
why it is evidence of considerable consumer surplus at the set ticket prices. [2]
Many $600 tickets sold for$2000, this means, to maximize revenue with in the
limited number of customers. There was less customer, to maximize revenue they
marked ticket price as $2000 which of only $600.
It is the evidence that, consumer surplus at the set ticket price because the NYC IS
more populated and it has the huge investment of wealthy cooperations and it is
the well-established one. So it prices, its ticket of $2000 and people dont care
about it, they just buy tickets for to watch marquee events.

(3) The diagram below shows the market for a lower bowl ticket in New York. Q* is
the number of lower bowl seats available at MetLife Stadium.

Price
D Supply

Surplus
Consumer $1500
E
Market
Price Producer
Surplus

S
Demand

O
Q* Quantity

(a) On the assumption that a price will be set to sell every seat, add the
appropriate supply schedule to the diagram. [1]

(b) Mark the equilibrium price (in $s) for a lower bowl seat on the diagram. [1]
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(c) Shade in and label the area that represents consumer surplus. [1]

(d) Shade in and label the area that represents producer surplus. [1]

(e) Now, suppose that the price was increased above the price that would lead to
every seat being sold. Explain how this would this affect consumer and [2]
Producer surplus.
When the price was increased in above price, this would affect consumer
surplus as consumer are satisfied or benefitted from ticket thats why they buy
ticket at any price.
Similarly, Producer surplus is affected by the amount of producer benefitted
by selling at the market price that is higher than the lowest price at which
would be willing to sell