Residents in the City of Econoville Enjoy Only Two Types

question 69

Essay

Residents in the city of Econoville enjoy only two types of recreational activities. The activities are biking and attending concerts. The demand for concert tickets is:
= 90,000 - 1,000 P_C + P_B. The supply of biking trail permits is set at:
= 150,000. The demand for biking trail permits is
= 250,000 - 1,000 P_B + 20 P_C. The city wishes to expand seating capacity at concert events.
To finance the concert hall expansion, the city is considering a tax of $5 per ticket. Given that the city institutes this plan, the supply of concert tickets will become
= 75,000. Before the expansion of the concert hall, the supply of concert tickets was fixed at 60,000. What is the effect on equilibrium prices of the additional seating capacity and the $5 tax? How much revenue does the tax generate? Did concert ticket revenue increase due to adding seating capacity and the tax?

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Definitions:

Extended Inventory

An expanded list of goods and materials kept on hand by a business, including raw materials, work-in-progress, and finished goods.

Decrease Retailer Prices

A strategy where retailers lower the prices of goods or services, potentially to increase sales volume or clear inventory.

Vertical Contracts

Arrangements between companies at different levels in the supply chain, such as manufacturers and retailers, to control the supply and price of products.

Benefits

Advantages or favorable outcomes resulting from specific actions, policies, or circumstances.