Assignment:
Instructions:
Insert your typed answers immediately following the corresponding question. Handwritten graphical responses are permitted; however, they too should be inserted immediately following the corresponding question (leave space so you can hand-draw your graphs).
1.) This offseason, the Chicago Cubs signed outfielder Jason Heyward to an 8-year, $184 million contract.
a) What should likely happen to the Cubs ticket prices in 2016 as a result of that signing? Why?
b) Suppose that after 8 years, the Cubs sign Heyward to 4 year contract, but this time it is worth $100 million (a higher average salary per year). What is likely to happen to Cubs ticket prices relative to 2016 prices? (Assume it is overwhelmingly expected that Heyward continues to play at his current level.)
2.) The New York Jets football team raises ticket prices from $100 to $110 per seat and experience a 5 percent decline in tickets sold. What is the elasticity of demand for tickets?
3.) Draw a graph that shows the demand for seats at an NFL stadium. Show how demand would be affected in each of the scenarios below. In addition to the Demand curve, draw the Marginal Revenue curve (which shifts with demand) and the Marginal Cost curve (assuming zero MC up to capacity). Show the effect of each scenario on both quantity and price for an average team. (You will have 5 different graphs)
a) The prices of parking and food at the games increase.
b) Televised games switch from free TV to pay-per-view only.
c) A new league forms with a team that plays nearby.
d) The quality of the team decreases dramatically.
e) The length of the season increases.