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Chapter 17: Problem 7

Following the 2016 Major League Baseball season, the market for home run hitters who were free agents and available to sign with any team was unexpectedly quiet. Players such as Edwin Encarnacion and Chris Carter signed for lower salaries and for fewer years than either they or their agents had expected. Here are two explanations for the relatively low salary offers: 1\. Mark Shapiro, president and CEO of the Toronto Blue Jays, explained, "There has been a shift ... in how people value \(\ldots\) defense and some of the other aspects of players' games." 2\. Brian Cashman, general manager of the New York Yankees, blamed the weak market on a greater-thannormal number of power hitters who were free agents: "The chessboard was set up with more participants than there were chairs." Draw two graphs depicting the demand and supply for home run hitters. In the first graph, illustrate a change in the market that is consistent with Mark Shapiro's explanation for the decline in salaries. In the second graph, illustrate a change in the market that is consistent with Brian Cashman's explanation for the decline in salaries. Briefly explain your graphs.

Short Answer

Expert verified
The declining salaries of home run hitters can be explained using supply and demand principles. Mark Shapiro's explanation suggests a shift in demand, where teams now value different aspects of a player's capabilities, reducing the demand for home run hitters. Brian Cashman's explanation suggests a supply shift, where there are more home run hitters in the market. Both shifts would contribute to the decrease in salaries for these players.

Step by step solution

01

The Demand Shift Explanation

According to Mark Shapiro's explanation, the demand for home run hitters decreased due to a change in how these players are valued. That means, the demand curve for home run hitters shifted to the left. At any given price level (salary), there are fewer teams willing and able to hire these players, hence the decrease in demand.
02

Drawing the Demand Shift Graph

To illustrate this, draw a graph with 'Salary' on the y-axis and 'Quantity of Home Run Hitters' on the x-axis. Sketch a downward sloping curve to represent the initial demand. Then, draw a second demand curve to the left of the first one to represent the decrease in demand.
03

The Supply Shift Explanation

According to Brian Cashman's explanation, there was an increase in the number of home run hitters available in the market, which implies an increase in supply. Therefore, the supply curve for home run hitters shifted to the right.
04

Drawing the Supply Shift Graph

Still using the same axes as in Step 2, sketch an upward sloping curve to represent the initial supply. Then, draw a second supply curve to the right of the first one to show the increase in supply.
05

Briefly Explain the Graphs

The first graph depicts a shift in demand for home run hitters. Teams reevaluated their priorities and valued other aspects of players' games, leading to a decrease in demand. The second graph shows an increase in supply for the same players due to more players available in the market. Both changes put downward pressure on the salaries of home run hitters - lower demand means teams are less willing to pay higher salaries, and greater supply means more players competing for the same roles, which also drives down salaries.

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