Why are shortages or surpluses more likely with preset prices, such as those on tickets, than...

Why are shortages or surpluses more likely with preset prices, such as those on tickets, than with flexible prices, such as those on gasoline?

Expert Solution

Answer) There are two important concepts which we will use to answer this question,first is concept of demand and supply and second is willingness to pay,when we talk about concept of demand and supply,we see surplus if supply is more than demand while shortage is there if demand is more than supply,now willingness to pay is your ability to pay as well as how much would you want to pay maximum for a product,so for example let us say there is a football match between two unknown teams with not much hype and ticket prices are fixed at $20,while most people would maximum pay $10 for it,so the result will be empty stadium or surplus in other words,now consider final of Fifa world cup and price per ticket is fixed at $10,000;now most people would be willing to pay much higher and result will be shortage;now consider this with flexible price product,flexibility will allow organizers or providers to estimate demand and charge prices accordingly leading to negligible surplus or shortage,in fact this is the case we see with lot of businesses who do surveys for willingness to pay and keep their prices in that range only,thus willingness to pay is a barrier with fixed price products or events or services creating surpluses and shortages.

Answer is complete.Thank you!

Rahul Sunny answered 1 year ago

Market forces usually put pressure on prices to adjust to equilibrium; surpluses and shortages are generally...

Market forces usually put pressure on prices to adjust to equilibrium; surpluses and shortages are generally undesirable by both buyers and sellers. But occasionally, you can observe firms knowingly setting prices above or below the equilibrium price. One example is the market for sneakers, where “a sneaker might cost $200 at retail and might sell for $1000 on the secondary market, just because of that difference between supply and demand.” Why do you think a company like Nike would find...

Why Americans are more likely to fear dying and death today than those living in an...

Why Americans are more likely to fear dying and death today than those living in an earlier time or another country.

a. why it’s illegal to sell but NOT to buy tickets at prices above those printed...

a. why it’s illegal to sell but NOT to buy tickets at prices above those printed on the tickets. **use the supply and demand analysis to explain why the equilibrium ticket price in an illegal secondary market tends to be higher than in a legal secondary market.** b. Post a thoughtful, well-worded response, a minimum of 8 sentences. Explain the two causes of market failures. Given their definitions, and discuss if the market can be affected by both types of...

why are costs of adjusting prices are an order of magnitude smaller than those associated with...

why are costs of adjusting prices are an order of magnitude smaller than those associated with adjusting quantities. why are adjusting prices a smaller cost compared to adjusting quantities?

For osteoporosis, since women are more likely to develop osteoporosis more than men. Why is this...

For osteoporosis, since women are more likely to develop osteoporosis more than men. Why is this the case? What are possible reasons that women are more likely to develop osteoporosis and what are the causes?

why are men more likely to have colon cancer than women

A marketing researcher predicts that college students will be more likely to purchase tickets for... A...

A marketing researcher predicts that college students will be more likely to purchase tickets for... A marketing researcher predicts that college students will be more likely to purchase tickets for the next football home game if their team won (vs. lost) the last game. The researcher asked 6 WSU students their willingness to purchase tickets (1= not likely at all, 7=very likely) and 6 EWU students their willingness to purhcase tickets (1=not likely, 7=very likely) (WSU won the game in...

Describe why those living on less than $2 a day are more vunerable to risk than...

Describe why those living on less than $2 a day are more vunerable to risk than those who make more money

Why are the indirect costs of financial distress likely to be more important than the direct...

Why are the indirect costs of financial distress likely to be more important than the direct costs of bankruptcy? (Choose the correct response.) A. Many indirect costs may be incurred even if the firm is not yet in financial distress, but simply faces a significant possibility that it may occur in the future. B. None of the above - both direct and indirects costs are equally important. C. Direct costs and costs to debt holders, whereas indirect costs affect both...

Anthropology Question: Why are females more likely to be carriers for color blindness than to be...

Anthropology Question: Why are females more likely to be carriers for color blindness than to be color blind themselves?

Question