Demand, supply, PED, consumer surplus, functions of price,
maximum price
Examination style paper 2
The economics of concert ticket prices
When the UK-based rock band Oasis tickets for summer 2025
went on sale a few weeks ago, they were priced at £148.50
($199). The scramble for tickets for shows in London, Cardiff,
and Manchester was frantic, with online queues of around
80,000 people waiting for 5 or 6 hours to reach their
purchasing point. When many fans reached the front of the
queue, they found the tickets were now priced at £355 ($476).
[Paragraph 1]
The price increase can be described as surge or dynamic pricing when producers change prices as
the demand for their product changes over time. Surge pricing is often seen in the markets for
services such as taxis, airlines and hotels when firms increase their prices when demand is price
inelastic at peak times, and firms decrease their prices when demand is price elastic at off-peak
times. In the Oasis ticket price situation, a high demand meant the demand for tickets was price
inelastic, and prices were increased. Surge price allows ticket sellers to gain some of the buyers'
consumer surplus in the concert ticket market. [Paragraph 2]
An important question is why concert tickets have become so expensive. The last time Oasis played
in the UK in 2009, the tickets cost £45 ($60), nearly a 200 per cent increase in price. The annual
increase in the average concert ticket price for major concerts is currently 20 per cent, and the
average ticket price for the top 100 tours is £102 ($137). [Paragraph 3]
The demand side factors behind this price increase could be considered in terms of the popularity of
the ‘experience economy’. People now want experiences rather than physical goods, and a large
music event attended by 80,000 people is very attractive to consumers. It is also worth considering
the demographic of people who go to music concerts now compared to years ago. Many people in
their 40s, 50s and 60s now go to live music in a way they did not years ago. This means there are
more potential and older consumers with more spending power than the young people who used to
go to concerts. [Paragraph 4]
There are also supply factors that can explain high ticket prices. The artists themselves are looking at
ticket revenue as the major source of their income because streaming income, whilst high for major
artists, does not match the income artists want for playing live. Big stars like Oasis, Taylor Swift and
Bruce Springsteen can demand a very high return for a music event. It is also worth noting that the
number of the very biggest names people want to see live is actually quite limited. Outside the cost
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of the artist, there are also the venue costs, which are high for state-of-the-art stadiums such as
Wembley (London), Parc de Princes (Paris), and the Hard Rock Stadium (Miami). On top of this, there
are extra costs that major music concerts involve, such as giant video screens, security, ticketing and
event management. [Paragraph 5]
Many commentators and even politicians have become involved in the debate surrounding the price
of concert tickets after the highly publicised Oasis ticket price situation. Some people have suggested
that a maximum price could be used because the subsidy cost puts this policy out of question. It is
not easy to intervene in cases like this unless the pricing is part of monopoly power and is anti-
competitive. Concert tickets are considered a luxury good, and the high price of concert tickets
fulfils its signalling, incentive, and rationing functions. Without a high price for concerts like Oasis
and Taylor Swift, the market will not clear and other methods of rationing are needed. Many people
in the music industry feel price controls will play into the hands of the parallel market where second-
hand ticket sellers can make huge profits. [Paragraph 6]
Table 1 is information produced by a market research company showing the relationship between
ticket prices and the quantity demanded for concert tickets for leading artists. [Paragraph 7]
Table 1
Price concert ticket ($) Quantity demanded (tickets)
120 900,000
200 850,000
280 700,000
Questions
a. Outline what you understand by the term 'demand is price inelastic'. [2] [Paragraph 2]
b. (i) Using the data in Table 1, calculate the price elasticity of demand for concert tickets when the
price increases from $120 to $200 and from $200 to $280. [4]
(ii) Using the price elasticity of demand data you have calculated, describe what happens to the price
elasticity of demand for the concert as the price increases from $120 to $200 and from $200 to
$280. [3]
c. (i) Define the term consumer surplus. [2] [Paragraph 2]
(ii) Using a demand and supply diagram, show the consumer surplus for concert tickets when the
market is in equilibrium. [2] [Paragraph]
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c. Using a demand and supply diagram, explain a demand factor that could explain a '20 per cent'
rise in concert tickets [4] [Paragraph 4]
d. Using a demand and supply diagram, explain a supply factor that could explain a '20 per cent' rise
in concert tickets. [4] [Paragraph 5]
e. Explain the rationing function price when the price of concert tickets increases. [4] [Paragraph 6]
g. Using information from the text and your knowledge of Economics, evaluate the view that
governments should intervene in the market for concert tickets by using a maximum price. [15]
Total [40]
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