Aaron Hank is a star hitter for the Bay City baseball team. He is close to breaking the major league record for home runs hit during one season, and it is widely anticipated that in the next game he will break that record. As a result, tickets for the team's next game have been a hot commodity. But today it is announced that, due to a knee injury, he will not in fact play in the team's next game. \Lambdassume that season ticket holders are able to resell their tickets if they wish. Use supply and demand diagrams to explain your answers to parts a and \(b\). a. Show the case in which this announcement results in a lower equilibrium price and a lower equilibrium quantity than before the announcement. b. Show the case in which this announcement results in a lower equilibrium price and a higher equilibrium quantity than before the announcement. c. What accounts for whether case a or case b occurs? d. Suppose that a scalper had secretly learned before the announcement that Aaron Hank would not play in the next game. What actions do you think he would take?

Before starting the analysis, it is essential to understand the basic concepts of supply and demand. The demand curve represents the quantity of a good consumers are willing to buy at different prices, while the supply curve represents the quantity of a good producers are willing to sell at various prices. The point where the supply and demand curves intersect is called the equilibrium point, which determines the market price and quantity.

In this scenario, we need to analyze the effects of the announcement on the demand curve. Since Aaron Hank's absence in the game will disappoint fans, the demand for tickets will decrease. This shift in demand leads to a new demand curve (D') that lies to the left of the original demand curve (D). Now, let's find the new equilibrium point where the new demand curve (D') intersects the supply curve (S). At this new equilibrium point, both the price and quantity are lower than before the announcement, as shown in the diagram below: [DIAGRAM] Supply and Demand Diagram for Scenario A: 1. Draw the original demand curve (D) and supply curve (S). 2. Draw a new demand curve (D') to the left of the original demand curve (D). 3. Locate the new equilibrium point by finding where D' intersects S. 4. Compare the new equilibrium price and quantity to the original equilibrium price and quantity. Result: Lower equilibrium price and quantity.

In this scenario, we have to analyze how the announcement affects both the demand curve and the supply curve. The demand curve will still shift to the left (D') due to Aaron Hank's absence. However, we should consider the possibility that season ticket holders may want to resell their tickets, increasing the quantity supplied. As a result, the supply curve (S') will shift to the right (original supply curve S). Now, let's find the new equilibrium point where the new demand curve (D') intersects the new supply curve (S'). At this new equilibrium point, the price is lower than before the announcement, but the quantity is higher, as shown in the diagram below: [DIAGRAM] Supply and Demand Diagram for Scenario B: 1. Draw the original demand curve (D) and supply curve (S). 2. Draw a new demand curve (D') to the left of the original demand curve (D). 3. Draw a new supply curve (S') to the right of the original supply curve (S). 4. Locate the new equilibrium point by finding where D' intersects S'. 5. Compare the new equilibrium price and quantity to the original equilibrium price and quantity. Result: Lower equilibrium price and higher equilibrium quantity.

Whether scenario A or scenario B occurs depends on the extent to which season ticket holders resell their tickets. If a substantial number of season ticket holders resell their tickets, then the supply curve will shift more to the right, leading to scenario B (lower price and higher quantity). On the other hand, if the number of resold tickets is small, the supply shift will be limited, leading to scenario A (lower price and lower quantity).

If a scalper had secretly learned before the announcement that Aaron Hank would not play in the next game, they might anticipate a decrease in demand for the game tickets. In order to minimize their losses, the scalper might choose to sell their tickets as soon as possible, even if it means selling them at a slightly lower price before the announcement affects the market. This way, they can avoid the potential sharp decrease in ticket prices once the news becomes public.