SUPPLY AND DEMAND: HOW MARKETS WORK

Here is a link to a Wall Street Journal Classroom Edition article. This article provides a real‐life example of music concerts tickets to describe how prices fluctuate as supply and demand change.

Did I Pay Too Much for Lady Gaga Tickets?
How to avoid rip‐offs when buying tickets to concerts this summer.

Concert ticket economics can be a little hard to untangle, especially when you are buying through the secondary market. Sometimes, even when demand dips, prices rise. Take this year. Concert attendance for the first three months slipped 3% over the same period in 2009, according to Live Nation Entertainment, a leading concert promoter. Yet spending per concertgoer over the same period ticked up 2%, to $59.71, and prices on the secondary market — brokers like Stubhub.com or Ticketnetwork.com — rose by an average of 8%, according to SeatGeek, an aggregator of secondary ticket site prices. The reason is pretty straight forward. If you're buying on the secondary market, you’re dealing with a broker who not only has access to harder‐to‐score tickets, but who is in it to make a profit. About 80% of tickets sold on the secondary market are professional ticket brokers, says Jack Groetzinger, co‐founder of SeatGeek. So how do you know if you are getting a good deal — or getting ripped off — when you are booking your summer entertainment? Here are some tips. 1. Look everywhere ‐‐ even if the concert isn’t sold out yet Lady Gaga tickets for July 1 in Boston start at $49.50 on the primary market, and are marked up to between $95 and $1,650 on secondary sites. Should you spring for the difference? Rule No. 1 is to get an idea of the market. How much are tickets purchased directly from the venue? How much is the broker marking them up? And most crucially, is the event sold out? Roughly 40% of the tickets on the secondary market are cheaper than at the box office, says SeatGeek’s Groetzinger. If an event is not sold out, prices “are nearly always better” on the secondary market because sellers have to lower them in order to be competitive with the box office. There are exceptions. For instance, tickets for Brandi Carlile, at The National in Richmond, Va., on June 6, are still on sale for between $16 and $26 apiece through Ticketmaster. The lowest price listing on StubHub on Friday was $84. 2. Don’t buy at the wrong time If possible, get on a band’s fan list early and you can get either discounts or first access to tickets. Dave Matthews Band, for example, is famous for this. Also, never buy a ticket for a big venue the weekend it goes on sale, says StubHub’s spokesperson. “The [secondary] market hasn’t had a chance to set the price,” he says. Be wary of someone who is selling a ticket the day after it went on sale — he likely only bought it to sell it for more money. Lastly, if you're interested in tickets to a popular artist in a small venue, prices increase as the event approaches, so look to buy early, says Groetzinger. If it’s a less famous artist playing in a big venue, prices tend to go down as the event date approaches, so be patient. 3. Group your bands, check the schedule and get a map Festivals allow you to catch multiple bands for a fraction of what it would cost to see them individually. Single‐day tickets to New Orleans Jazz and Heritage Festival in April were just $45 in advance and $60 at the gate, and concertgoers had 11 stages to choose from, with headliners like Simon & Garfunkel and Pearl Jam. But if you’re going primarily for two or three artists, make sure they aren’t performing at the same time on different stages. And check the map to see that you're able to get from one stage to the next in time, says the StubHub spokesperson. On the opening day of New Orleans Jazz and Heritage Festival, for instance, the Black Crowes and Lionel Richie played at the same time. 4. Don’t buy from scalpers With digitized tickets, it’s easier for fraudsters to sell multiple sets or to alter and repeat barcodes. Lady Gaga fan Nina Liotta, for instance, recently made headlines in New York for paying $300 for fake concert tickets. There’s no money trail, as you would usually pay cash, so you’re left empty handed and unable to get in, says Groetzinger. Buying electronic tickets that are emailed to you can be risky too: You don’t know who else they’ve been emailed to. A handful of secondary markets will have a 100% money back guarantee. StubHub and SeatGeek recommend stearing clear of Craigslist to avoid scams and because the site doesn't provide guarantees. Craigslist advises that you deal locally with people you can meet in person. “Follow this one simple rule and you will avoid 99% of the scam attempts on Craigslist,”the site says.

ACTIVITIES:

1. Identify the definitions below with four key economics concepts in order to understand the topic

a) The amount of a good or service that buyers are willing and able to buy at all possible prices during a period of time.

b) Places, institutions or technological arrangements where or by means of which goods or services are exchanged. Also, the set of all sale and purchase transactions that affect the price of some good or service.

c) The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time.

d) The amount of money must be paid in exchange for a product or service.

2. What is the difference between a primary market and a secondary market?

3. Explain the market behavior and how demand and supply interact with price changes. This website explains the relationship between supply and demand and how they form the backbone of the market economy. www.investopedia.com/university/economics/economics3.asp

4. Find other examples to illustrate the difference between the theoretical behavior of the market and real life.