Tony is an ASU Sun Devils football fan Below
Subject: Economics   / General Economics
Question
1. Tony is an ASU Sun Devils footballfan. Below is a table that shows his willingness to pay for each home game.
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Game Willing to Pay
New Mexico State $30
San Diego State $50
Oregon $80
Washington $75
USC $90
Colorado $100
Arizona $125
a. Construct a demand schedule based on the following prices:
Price Quantity Demanded
$125
$100
$90
$80
$75
$50
$30
b. Suppose ASU is considering lowering the price from $90 to $80. Show the output and price effect associated with that price change. Show your work.
c. What price should ASU charge to maximize revenues? Use the demand schedule to show your work.
d. Based on the price in part c, calculate the consumer surplus for each game as well as for the entire season. Show your work below.
Price Quantity Demanded Consumer Surplus
$125
$100
$90
$80
$75
$50
$30
e. Johnny and Michael like soft drinks and hot dogs. The below schedule shows each person’s willingness to pay for each good.
Soft Drinks Hot Dog
Johnny $5 $4
Michael $2 $7
The cost of providing a soft drink is $1 and the cost of providing a hot dog is $2. In the past, ASU has sold the goods individually. It is considering offering the goods only as a bundle this year. Will the strategy increase ASU’s profits? Explain. (Note: You can answer this question without making any calculations).
