Microeconomics

Chapter 6

Scalping tickets is a great way to see how markets work. For many, going to the game has value, and that value will vary widely. When teams price tickets and don't sell out it lets us know that they priced tickets too highly. The opposite is true for games that do sell out and more people want to go to the game than tickets available. However, the scalper and ticket buyer truly show how a market (free from price controls) can lead better outcomes. Yet, in many states ticket scalping is either illegal or strictly enforced.

Consider the state of Georgia. Under Georgia state law, it is unlawful to sell a ticket in excess of face value (there are some added caveats as well). Whereas, Alabama allows resell of tickets with the condition that the scalper has paid $100 for a license.

A) Consider that the ticket price set by the team, is not the market clearing price. If the stadium isn't filled, then the price of the ticket was too _____ and created a _____ in the market.

B) Consider that the ticket price set by the team, is not the market clearing price. If the stadium is full, and more people want to go to the game, then the price of the ticket was too _____ and created a _____ in the market.

C) Explain why, in states where scalping is illegal, ticket scalping is essentially a price ceiling of zero.

D) In a state where scalping is illegal, what creative way could a scalper sell you a ticket for more than the face value of the ticket?

Chapter 7

Consumer surplus is the concept that you receive benefits by participating in the market. That is, by purchasing a good or service for lower than what your maximum willingness to pay is you actually received an implicit benefit of the difference of the two prices. For example, you may have purchased a shirt for $25, but you were willing to pay $30 for it. You net $5. These savings can then be used on future purchases.

A) Think of two items that you can purchase locally. List the price of each.

B) Go to Amazon.com and find those same items. List a few of the prices that are available from Amazon and the marketplace (where it says #new and used from $$$)

C) Think of how much you would be willing to pay for the two items you listed, then calculate the consumer surplus you receive by purchasing the items locally and from Amazon. What difference do you see in your consumer surplus?