The number of seats in a football stadium is fixed at 70,000.The team raises the price of a ticket from $30,at which 70,000 are sold,to $40,and it sells 60,000 tickets.The price change caused a change in the consumer surplus of:
A)-$10.
B)-$650,000.
C)-$100,000.
D)-$10,000.

Question

Quizplus · Accepted Answer

The consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Initially, at $30 per ticket for 70,000 tickets, the total revenue is $2,100,000. After the price increase to $40, for 60,000 tickets, the total revenue is $2,400,000. The change in consumer surplus can be seen as the area of the triangle formed by the price change and the change in quantity sold, which is 1/2 * base * height = 1/2 * 10,000 * $10 = $50,000. However, there's also the loss in consumer surplus from the 10,000 tickets no longer bought, which is 10,000 * $30 = $300,000. Adding these together, the total change in consumer surplus is $350,000. However, the correct interpretation involves considering the total revenue increase ($300,000 from the price increase for the 60,000 tickets sold at the higher price) and the lost consumer surplus for the 10,000 tickets not sold at the new price, which would be 10,000 * ($40 - $30) = $100,000, leading to a net change in consumer surplus of -$400,000. The provided options do not accurately reflect this calculation, suggesting a misunderstanding in the explanation. The correct answer should reflect the loss in consumer surplus due to both the price increase and the decrease in quantity sold, which isn't directly represented by the given choices.

The Number of Seats in a Football Stadium Is Fixed