Suppose the Lakers did a study that showed that the demand for tickets was perfectly inelastic at the capacity of building up to a price of $500 per ticket, at which point it becomes perfectly elastic. Draw a supply and demand diagram assuming a building capacity of 20,000. What would this imply about their best pricing strategy?

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The Answer is When the demand curve is perfectly inelastic, it is a vertical line. When it is perfectly elastic, it is a horizontal line. Hence, it looks like this:

When the demand curve is perfectly inelastic, it is a vertical line. When it is perfectly elastic, it is a horizontal line. Hence, it looks like this: Figure 2.7 Assuming that the supply curve is a vertical line at the capacity of the arena (20,000), the supply can demand picture looks like this: Figure 2.8 where the heavy black segment is the intersection of the supply and demand curves. This implies that the Lakers can sell 20,000 seats at any price up to $500. At any price above $500, they cannot sell any seats. The best strategy is thus to sell tickets for $500 each.

Figure 2.7
Assuming that the supply curve is a vertical line at the capacity of the arena (20,000), the supply can demand picture looks like this:

Figure 2.8
where the heavy black segment is the intersection of the supply and demand curves. This implies that the Lakers can sell 20,000 seats at any price up to $500. At any price above
$500, they cannot sell any seats. The best strategy is thus to sell tickets for $500 each.

Suppose the Lakers Did a Study That Showed That the Demand