Download 4) Student work 4

Fans scramble for Lady Gaga tickets
Summary of the news
Lady Gaga is going to hold two concerts on May 2nd and 3rd at Asia World-Expo in Hong
Kong. Thousands of little monsters (Lady Gaga’s fans) scramble for the tickets and queue
up outside Tom Lee Music to snatch a ticket for the Born This Way Ball. Many people
are tempted to queue to buy the tickets and some want to resell them to earn money.
Introduction
In this news, we are going to apply a few economic concepts to explain this phenomenon. They
are scarcity, opportunity cost and excess demand.
Scarcity --- Limited resources are not enough to satisfy unlimited wants.
Opportunity cost --- Cost expressed in terms of the highest-valued option forgone.
Excess demand --- The quantity demanded is higher than the quantity supplied at the
prevailing price.
Economic Analysis
First, AsiaWorld-Arena has a maximum capacity of 14000 seats, which means the supply of the
tickets is fixed, while the wants of fans are more than 14000 tickets. The Production Company
sets the maximum number of tickets that each buyer can purchase at 8. .This shows that the
concert tickets are economic goods. The quantity is not sufficient to satisfy all human wants,
more is preferred to less and scarcity occurs. The buyers have to compete for the tickets and thus
competition is required to allocate them. Competition is the process of resolving inter-personal
conflicts for economic goods (concert tickets). In this case, the non-price competition i.e. first
-come -first-served is involved. The winners are those who arrive at the ticket office earlier while
the late comers are discriminated against. This shows that scarcity implies competition and
discrimination. Under scarcity, competition and discrimination are inevitable in a society.
Before the date the tickets went on sale, there was already a big queue lining up outside the ticket
office overnight. Most of the people were housewives and South Asian people. Maybe you will
think that it’s strange that Lady Gaga’s fans are housewives instead of youngsters. Actually the
aim of the housewives and the South Asian people was to earn money. Secondary markets, which
are also called scalpers, will make a profit from the difference between the fixed ticket price and
the market price. Speculation on the concert tickets is very common in Hong Kong.
P. 1
Apart from the public sale, there is an internal booking. For people who buy the tickets through
an internal booking, their opportunity costs in terms of money are higher than those who buy in
the ticket office as they need to pay an additional charge HK$205 to the show promoter Live
Nation and a HK$10 handling fee charged by ticketing agent HK Ticketing.
Must the existence of scalpers be harmful to the consumers?
Most of the consumers think that scalpers are harmful to them as they resale the tickets at a much
higher price. In fact, the scalpers exist due to the excess demand caused by the under pricing in
the market. A higher ticket price paid to the scalpers ensures the allocation of tickets to the
highest value users.
Why don’t working people queue up for the tickets to earn money?
If the working people queue up for the tickets, the opportunity cost is not only the money price
of the concert tickets but also the time cost --- the highest-valued alternative use of the time to
work. Their income forgone is higher than the housewives and South Asian people. Moreover, if
the working people queue overnight, they will not get enough as their working efficiency is
affected. Therefore, we can hardly see any business people queue up for the tickets.
Now, we are going to analyze the concept of excess demand .We will take the $1280 ticket as an
example.
As shown in the graph, the price of the concert
ticket is $1280 which is much lower than the
equilibrium price (P*). The supply curve is
vertical because the supply of the concert
tickets is fixed which is unchanged. In this case,
we can see that the amount of the tickets
available cannot satisfy the quantity demanded
of people, as the supplier will only hold two
concerts in Hong Kong.
When the price of the concert ticket is $1280,
the quantity demanded (Qd) is much higher
than the quantity supplied, 10000 of the tickets.
The difference between the quantity demanded
and 10000 tickets is the excess demand.
P. 2
On the first day of the sale of concert tickets, there was a long queue waiting outside the ticket
office. All the tickets were sold within 30 minutes, but still many people couldn’t buy the tickets.
The reselling price of a ticket has been raised to more than $10000, which is nearly 10 times the
original price. It is evident that the price of tickets is lower than the equilibrium price, which
leads to the shortage of the tickets.
How to solve the excess demand?
Due to the excess demand, the supplier has decided to hold four more concerts to ease the
shortage of the tickets. Here is a diagram after the supplier holds the extra concerts.
From the diagram, we can see that the supply
curve shifts to the right from S to S1, as the
supplier holds four more concerts, so it
increases the supply of the tickets from
10000 to 40000 tickets. Also, the equilibrium
price decrease from P* to P1 and the amount
of the excess demand also decreases.
In addition, the resale price of the concert
tickets in the secondary market also drops.
Scalpers gain less than before or some even
face losses.
Also, after holding the extra concerts, the supplier decided the
tickets could only be bought through the customer service hotline
and the internet booking. The maximum quantity of tickets that
the people can buy has changed from 8 to 4 to whack the scalpers
and let the “real little monsters” benefit from it.
P. 3
Conclusion
To conclude, if the goods are economic goods, the problem of scarcity will occur. If we want to
get the economic goods, we have to forgone something, either money or time costs.
We think that the supplier has used many ways to solve the shortage of the tickets, such as
holding four more concerts and increasing the price of the tickets through the internal bookings
to allow more tickets for public sale. In fact, holding more concerts can benefit both the supplier
and consumers. The supplier may make more profits and more consumers can enjoy the concerts.
However, the costs of the supplier also increase
such as payments to Lady Gaga and the rental of
Asia World-Expo. Some consumers may attend all
the concerts and increase their expenditure. For the
scalpers, they cannot sell the tickets at higher prices
as the supply of concerts increases. This shows that
having extra concerts will benefit the supplier and
consumers but not the scalpers.
P. 4