CH03 - 500_12489_Ch03_58-84 2:02 PM Page 58 chapter 3 >...

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Supply and Demand GRETZKY’S LAST GAME What you will learn in this chapter: What a competitive market is and how it is described by the supply and demand model What the demand curve is and what the supply curve is The difference between move- ments along a curve and shifts of a curve How the supply and demand curves determine a market’s equilibrium price and equilibri- um quantity In the case of a shortage or sur- plus , how price moves the mar- ket back to equilibrium 58 >> chapter 3 HERE ARE SEVERAL WAYS YOU CAN GET tickets for a sporting event. You might have a season pass that gives you a seat at every home game, you could buy a ticket for a single game from the box office, or you could buy a ticket from a scalper . Scalpers buy tickets in advance—either from the box office or from season ticket holders who decide to forgo the game—and then resell them shortly before the event. Scalping is not always legal, but it is often profitable. A scalper might buy tickets at the box office and then, after the box office has sold out, resell them at a higher price to fans who have decided at the last minute to attend the event. Of course, the profits are not guaranteed. Sometimes an event is unexpectedly “hot” and scalped tickets can be sold for high prices, but some- times an event is unexpectedly “cold” and Fans paid hundreds, even thousands, of dollars to see Wayne Gretzky and Michael Jordan play their last games. How much would you pay to see a music star, such as Shania Twain, one last time? What about your favorite athlete? T AFB/Corbis Ronal Siemoneit/Corbis Shelly/Castellanos/Zuma scalpers end up selling at a loss. Over time, however, even with some unlucky nights, scalpers can make money from eager fans. Ticket scalpers in the city of Ottawa had a good few days in April 1999. Why? Because Wayne Gretzky, the Canadian hockey star, unexpectedly announced that he would retire from the sport and that the April 15 match between the Ottawa Senators and his team, the New York Rangers, would be his last game on Canadian soil. Many Canadian fans want- ed to see the great Gretzky play one last time—and would not give up just because the box office had long since sold out. Clearly, scalpers who had already stocked up on tickets—or who could acquire more tickets—were in for a bonanza. After the announcement, scalped tickets began sell- ing for four or five times their face value. It was just a matter of supply and demand. 500_12489_Ch03_58-84 3/14/05 2:02 PM Page 58
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CHAPTER 3 SUPPLY ANND DEMAND 59 Supply And Demand: A Model Of A Competitive Market Ticket scalpers and their customers constitute a market—a group of sellers and buy- ers. More than that, they constitute a particular type of market, known as a compet- itive market. Roughly, a competitive market is a market in which there are many buyers and sellers of the same good or service. More precisely, the key feature of a competitive market is that no individual’s actions have a noticeable effect on the price at which the good or service is sold.
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CH03 - 500_12489_Ch03_58-84 2:02 PM Page 58 chapter 3 >...

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