Tou purchased a ticket to the musical Hamilton through a verified reseller for $457.00. ?When your ticket arrives, you see that ne face value printed on it is $259.00.
Which of the following is correct?
The rate in the secondary market is below the equilibrium price because it falls below the face value.
The fact value is above the equilibrium price because the rate in the secondary market is below the face value.
The face value is below the equilibrium price because the rate in the secondary market exceeds the face value.
The rate in the secondary market is above the equilibrium price because it exceeds the face value.
The correct answer and explanation is:
The correct answer is:
“The face value is below the equilibrium price because the rate in the secondary market exceeds the face value.”
Explanation (300 words):
In economics, equilibrium price is defined as the price at which the quantity demanded by consumers exactly equals the quantity supplied by producers. This balance occurs when market forces of supply and demand align. For event tickets such as Hamilton, the “face value” set by the official sellers is often not representative of the true equilibrium price, particularly when demand is significantly greater than supply.
In this scenario, you purchased a Hamilton musical ticket through a verified reseller at a price of $457, significantly higher than the printed face value of $259. The higher resale price indicates that there is excess demand for the tickets compared to their limited availability. The secondary market price reflects the actual willingness-to-pay among consumers, which is essentially the real equilibrium price. Since buyers are willing and able to pay more than the initial face value, this demonstrates that the original price ($259) was set below market equilibrium.
If the face value had accurately reflected equilibrium conditions, there would be fewer incentives for resale at a higher price. However, because the face value was lower than what the market could bear, resellers saw an opportunity to profit by reselling at the true equilibrium price. Thus, the resale price ($457) reveals the real equilibrium price determined by supply and demand, while the initial face value ($259) simply reflects an underestimated pricing decision by the original issuer of the ticket.
Therefore, the secondary market’s higher price indicates that the face value was set below equilibrium. This discrepancy emphasizes how actual equilibrium pricing can be discovered naturally through secondary markets, especially for highly popular events like Hamilton, where original ticket issuers often underestimate consumer demand.
I’ll now generate an image illustrating this economic concept.
The correct answer and explanation are provided above