Which of the following best explains how the forces of supply and demand affect the sale price of event tickets?

• A. If demand for tickets increases while supply remains fixed, the equilibrium price of tickets will rise.
• B. If supply of tickets increases while demand remains fixed, the equilibrium price of tickets will rise.
• C. If demand for tickets decreases and supply remains fixed, the equilibrium price of tickets will rise.
• D. If both supply and demand for tickets decrease, the equilibrium price will always increase.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the basic concepts of supply and demand. Demand refers to how much consumers want a good or service at various prices, while supply refers to how much producers are willing to sell at various prices.
2. Step 2: Recall the law of demand, which states that, all else equal, as the price of a good increases, the quantity demanded decreases, and vice versa. Similarly, the law of supply states that as the price increases, the quantity supplied increases.
3. Step 3: Analyze what happens when demand increases while supply remains fixed. An increase in demand means more people want tickets at every price, but the number of tickets available does not change. This creates upward pressure on the price, raising the equilibrium price.
4. Step 4: Consider the opposite scenarios: if supply increases while demand is fixed, the increased availability tends to lower the price; if demand decreases while supply is fixed, the price tends to fall; if both supply and demand decrease, the effect on price depends on the relative magnitude of the shifts.
5. Step 5: Conclude that the correct explanation is that when demand increases and supply is fixed, the equilibrium price rises, because more buyers compete for the same number of tickets, pushing prices up.