Question

Last season, the Calgary Flames averaged 19,000 fans per game at an average price of $50 per ticket. At the start of the current season, the Flames decide to increase ticket prices from $50 to $70. Attendance at Flames games has declined to 17,000 tickets sold per game. Are fans better or worse off with the Flames' change in pricing policy? How much?

Calculate consumer surplus before and after the pricing policy change.

Hint: the maximum price that Flames fans are willing to pay is $250 and there are 41 home games in an NHL season.

Answer 1

Consumer surplus before the price change for one game

CS = = * (250 – 50) × 19,000

G CS = $ 1,900,000

Now, after the change in price the consumer surplus for one game

CS = 5x (250 – 70) 17,000

CS = $ 1,530,000

Loss of consumer surplus per game = $ 1,530,000 - $ 1,900,000

= - $ 370,000

Total loss in consumer surplus = 41 × -370,00 = - $ 15,170,000

Consumers are worse off as their consumer surplus has decreased by $ 370,000 per game or, $ 15,170,000 in the whole season.

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.