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Supply and demand of park admission

The problem is this:

d. Suppose there is a series of snow storms, what does it do to the supply and demand curves? What about if the wages for park rangers increased? Show direction of change on your graph,

e. Suppose the prices increases from $2 from the equilibrium price. Use your supply and demand curves to determine the demand at the new price. What is the price elasticity of demand? What does the price elasticity you found mean?

f. Suppose the supply increases by 5 mil admission tix, what is the price elasticity of supply? what does the price elasticity you found mean?

I am most concerned with Problem D more than anything but would like help or a better explanation if you can. I'm attaching the graph at the point where I got stumped.

thank you for your help on this!


Solution Preview

See the attached file. For parts a and b, you have a good understanding of what happens when price is too high (it needs to come down) but I think they also want you to explain why. It is a process that begins with a surplus, because the park wants to sell more tickets at that price than buyers are willing to purchase. There are too few visitors to the park at this price. To increase the number of visitors the park is forced to lower its price. Likewise when the price is too low, the park is flooded with visitors. It responds by increasing prices, because it is not willing to deal with that many visitors at such a low ...

Solution Summary

The expert determines the price elasticity of supply, effects of snow storms on supply and demand curves, and determining new equilibrium prices.