Thursday, October 1, 2009

Test your understanding of economics in the news: Is this a change in supply or a change in demand?

In the October 1, 2009 article "Mets cutting season ticket prices 10-20 percent," Associated Press baseball writer Ronald Blum reports that ticket prices for Mets baseball games are decreasing for 2010.

Can you illustrate this price change in the market for Mets baseball tickets using supply and demand analysis?

Is the decrease in the price of tickets caused by (a) an increase in the supply of tickets to Mets baseball games, (b) a decrease in the supply of tickets to Mets baseball games, (c) an increase in the demand for tickets to Mets baseball games, or (d) a decrease in the demand for tickets to Mets baseball games?

Read the article below and then illustrate these changes in the market for tickets to Mets baseball games with a graph that shows the initial positions of the supply and demand for Mets tickets and the new positions of the supply and demand curves.

(Hint: Only one of the curves shifts. This article discusses the prices the Mets organization will charge. So this is not asking about the resale market. Have the Mets changed the number of seats in the stadium?)

There is a link at the bottom that provides the answer.
NEW YORK (AP)—Ticket prices are tumbling for the New York Mets, mirroring their performance on the field.

The Mets said Thursday they are cutting the price of 2010 season tickets by an average of at least 10 percent and in some categories more than 20 percent following a disappointing opening year at Citi Field.

“What happened on the field this year was certainly disappointing,” Mets executive vice president Dave Howard said. “We think it will prove to be an aberration. The injuries were so widespread and had such an impact. We’re confident we’ll come back healthy and better next year. But the economy is still a challenge and we just wanted to be as aggressive as we could in reducing the pricing.”

Picked by some to reach the World Series, the Mets were devastated by injuries to Carlos Delgado, Carlos Beltran, Jose Reyes, David Wright, Johan Santana, J.J. Putz and others. They head into the final weekend of the season with a 67-92 record, their worst since 2003.

In a sign that general manager Omar Minaya will return, the Mets mentioned him as part of rebuilding plans in an e-mail sent Thursday to season ticket holders announcing the price cut.

“You soon will hear from ownership and Omar about how we plan to improve the ballclub through a combination of player signings, trades, enhanced player development and continued commitment to one of the highest player payrolls in Major League Baseball,” the e-mail said.

While the Mets’ full-season equivalents increased 9 percent to about 25,000 this year, Howard said the Mets noticed which high-priced areas didn’t sell well, such as lower-deck seats behind the photo cages and first- and second-deck seats as they wrapped into the outfield. The team heads into its final series averaging nearly 39,000 fans per game at Citi Field, where the listed capacity is 41,800.

While the team will retain its five-tiered pricing structure next season, the mix will change. There were 34 platinum and gold games this year, up from 27, while the bronze and value dates decreased from 34 to 28.

“There will be a higher percentage of the bronze and value dates,” Howard said.

The Yankees announced two weeks ago that 84 percent of their seats will have the same price as part of season tickets next year, 13 percent will have a decrease and just 3 percent will have an increase—in the section just to each side of the premium seats in the second deck.

The cuts at Yankee Stadium are among their most expensive tickets, which run from $325 to $2,500 per game as part of season plans.

The Mets charge the same price for individual seats and season tickets. Their highest-priced seats averaged $495 per game this year and their cheapest seats averaged $19.

CLICK HERE FOR THE ANSWER. (Since the number of seats cannot be changed in the short term, one could argue that the supply curve for tickets is vertical. The attached graph does not show this.)

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