Some market transactions get a bad name that is not warranted.

Tickets to athletic and artistic events are sometimes resold at higher-than-original prices—a market transaction known by the term "scalping." For example, the original buyer may resell a $50 ticket to an NHL game for $200, $250, or more. The media often denounce scalpers for "ripping off" buyers by charging "exorbitant" prices. Scalping and extortion are synonymous in some people's minds.

But is scalping really sinful? We must first recognize that such ticket resales are voluntary transactions. Both buyer and seller expect to gain from the exchange. Otherwise it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event more than the

$200. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The "scalping" market simply redistributes assets (game or concert tickets) from those who value them less to those who value them more.

Does scalping impose losses or injury on other parties, in particular the event sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. In so doing they suffer an economic loss in the form of less revenue and profit than they might have otherwise re-

ceived. But the loss is self-inflicted because of their pricing error. That mistake is quite separate and distinct from the fact that some tickets were later sold at a higher price.

What about spectators? Does scalping deteriorate the enthusiasm of the audience? No! People who have the greatest interest in the event will pay the scalper's high prices. Ticket scalping also benefits the teams and performing artists, because they will appear before more dedicated audiences—ones that are more likely to buy souvenir items or CDs.

So, is ticket scalping undesirable? Not on economic grounds. Both seller and buyer of a "scalped" ticket benefit, and a more interested audience results. Event sponsors may sacrifice revenue and profits, but that stems from their own misjudg-ment of the equilibrium price.

Part One • An Introduction to Economics and the Economy charter summary

1. A market is an institution or arrangement that brings together buyers and sellers of a product, service, or resource for the purpose of exchange.

2. Demand is a schedule or curve representing the willingness of buyers in a specific period to purchase a particular product at each of various prices. The law of demand implies that consumers will buy more of a product at a low price than at a high price. Therefore, other things equal, the relationship between price and quantity demanded is negative or inverse and is graphed as a downsloping curve. Market demand curves are found by adding horizontally the demand curves of the many individual consumers in the market.

3. Changes in one or more of the determinants of demand (consumer tastes, the number of buyers in the market, the money incomes of consumers, the prices of related goods, and price expectations) shift the market demand curve. A shift to the right is an increase in demand; a shift to the left is a decrease in demand. A change in demand is different from a change in the quantity demanded, the latter being a movement from one point to another point on a fixed demand curve because of a change in the product's price.

4. Supply is a schedule or curve showing the amounts of a product that producers are willing to offer in the market at each possible price during a specific period. The law of supply states that, other things equal, producers will offer more of a product at a high price than at a low price. Thus, the relationship between price and quantity supplied is positive or direct, and supply is graphed as an upsloping curve. The market supply curve is the horizon tal summation of the supply curves of the individual producers of the product.

5. Changes in one or more of the determinants of supply (resource prices, production techniques, taxes or subsidies, the prices of other goods, price expectations, or the number of sellers in the market) shift the supply curve of a product. A shift to the right is an increase in supply; a shift to the left is a decrease in supply. In contrast, a change in the price of the product being considered causes a change in the quantity supplied, which is shown as a movement from one point to another point on a fixed supply curve.

6. The equilibrium price and quantity are established at the intersection of the supply and demand curves. The interaction of market demand and market supply adjusts the price to the point at which the quantity demanded and supplied are equal. This is the equilibrium price. The corresponding quantity is the equilibrium quantity.

7. The ability of market forces to synchronize selling and buying decisions to eliminate potential surpluses and shortages is known as the rationing function of prices.

8. A change in either demand or supply changes the equilibrium price and quantity. Increases in demand raise both equilibrium price and equilibrium quantity; decreases in demand lower both equilibrium price and equilibrium quantity. Increases in supply lower equilibrium price and raise equilibrium quantity; decreases in supply raise equilibrium price and lower equilibrium quantity.

9. Simultaneous changes in demand and supply affect equilibrium price and quantity in various ways, depending on their direction and relative magnitudes.

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