Inelastic Ticket Pricing

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Lesson Plan Outline Title: Elasticity of Demand Subject: Inelastic Ticket Pricing from La Trobe University Lesson "Inelastic Ticket Pricing" Description/Abstract (2-3 sentences): Many major sports teams tend to price their tickets in the inelastic region of the demand curve, but why is this so? This activity will help explain one of the likely reasons why sports teams do this, the idea of complementarities (a relationship where two factors can improve a specific outcome). Because of complementarities, sports teams are able to make a larger total revenue as they price their tickets in the inelastic region of the demand curve. Materials needed: Calculator White Boards (can be passed out first) Slips of Paper (6 labeled…show more content…
Today, we are going to calculate the significance of complementarities and its effect on total revenue. Procedure (Steps to Deliver): Select two students to be the general managers of two different basketball franchises, the Orlando Magic and Miami Heat. Divide the rest of the student into three groups of six (if extra then add them to each group and put them in charge of white board) Label one of the groups as upper bowl ticket consumers, the other as lower bowl ticket consumer, and the final as box ticket consumers. Give the six students in the upper bowl group the $60 slips of paper, the six students in the lower bowl group the $80 slips of paper, and the six students in the box group the $100 slips of paper. Tell the class that this is their "budget" for the game. Pass out the demand curve respective to each group and tell them that is the demand curve for their population if six…show more content…
In this activity, it is assumed that the consumer spends all of his/her budget on as many commodities possible. If a consumer can only afford the ticket and parking, then it is assumed that the consumer doesn't buy any concessions. On the other hand, if a consumer has money left over, then it goes back in his/her pocket and has no effect on total revenue. (The results for the Orlando Magic Manager should be $114 from upper bowl, $154 from lower bowl, and $194 from the box since there will only be two consumers from each group. The results for the Miami Heat Manager should be $148 from upper, $228 from lower, and $308 from box since there will be four consumers from each group). Tell the students to total the individual revenues gained from the seat sections for each manger ($462 for Orlando Magic and $684 for Miami Heat). Ask students to explain the total revenue differences between the two franchises in terms of elasticity and complementarities (Since the Miami Heat had ticket prices in the inelastic section of the demand curve, they were able to attract more consumers, which means more ticket and concessions sales, and create more revenue than the Orlando

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