[Related to Solved Problem 3.3 on page 88\(]\) An article discusees the market for autographs by Mickey Mantle, the superstar center fielder for the New York Yankees during the 1950 s and 1960 s, "At card shows, golf outings, charity dinners, Mr. Mantle signed his name over and over." One expert on sports autographs was quoted as saying, "He was a real good signer.... He is not rare." Yet the article quoted another expert as saying, "Mr. Mantle's autograph ranks No. 3 of most-popular autographs, behind Babe Ruth and Muhammad Ali." A baseball signed by Mantle is likely to sell for the relatively high price of \(\$ 250\) to \(\$ 400\). By contrast, baseballs signed by Whitey Ford, a teammate of Mantle's on the Yankees, typically sell for less than \(\$ 150\). Use one graph to show both the demand and supply for autographs by Whitey Ford and the demand and supply for autographs by Mickey Mantle. Show how it is possible for the price of Mantle's autographs to be higher than the price of Ford's autographs, even though the supply of Mantle autographs is larger than the supply of Ford autographs.

Step by step solution

01

Draw the Diagram

Start by drawing two separate supply and demand graphs, one for Mickey Mantle and the other for Whitey Ford. Label the vertical axis as 'Price' and the horizontal axis as 'Quantity'. It's important to remember that the supply curve typically slopes upwards, indicating that as the price increases, the quantity supplied also increases. The demand curve, on the other hand, slopes downwards, reflecting that as the price falls, the quantity demanded rises.

02

Plot Mantle's Graph

On the Mantle graph, draw a more elastic supply curve and mark it as S1, reflecting that Mantle was a 'good signer' suggesting a larger quantity supplied. Next, draw a higher demand curve D1, indicating that Mantle's autograph is more popular and hence, has a higher price.

03

Plot Ford's Graph

On Ford's graph, draw a less flexible supply curve, marked as S2, indicating a lower quantity of autographs supplied. Draw a demand curve D2 lower than D1, illustrating less popularity and hence lower price for Ford's autograph.

04

Comparison of the Graphs

By comparing both graphs, despite the larger supply for Mantle autographs (due to a more elastic supply curve), the higher demand for his autographs results in a higher equilibrium price compared to Ford's autographs. Therefore, it demonstrates how the intersection of demand (popularity) and supply (availability) determines prices in the market, even if more units are available.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Equilibrium Price

When exploring the intriguing world of autograph collection, particularly of sports legends like Mickey Mantle, it's critical to understand the concept of equilibrium price. This concept refers to a point on a graph where the supply of an item, such as autographs, matches the demand. It is here where buyers and sellers agree on a price that works for both parties. Imagine a seesaw perfectly balanced – this is the equilibrium state in a market.

In our case, Mickey Mantle's signed memorabilia carries a higher equilibrium price than that of Whitey Ford. This scenario occurs when the demand (lines of fans and collectors seeking Mantle's signature) exceeds the supply (the number of autographs Mantle can sign), driving prices up. However, it is possible, as the problem demonstrates, for supply to be high (given Mantle's reputation as a 'good signer') yet equilibrium prices to remain elevated, indicating a robust and persistent demand reflecting his longstanding popularity.

Elasticity of Supply

Moving onto elasticity of supply, this idea stretches our understanding of market dynamics. It measures how the quantity supplied of a good, such as autographs, responds to a change in price. A supply that is considered elastic, like we see with Mickey Mantle's autographs, will have a significant change in quantity supplied when prices shift.

If we sketch the scenario, we see Mantle's graph showcasing a supply curve that is quite responsive to changes in price due to his willingness to sign often. High elasticity indicates that an increase in demand and subsequently higher prices will lead to a proportionally larger quantity supplied. For autograph collectors, recognizing elasticity can be crucial since it predicts the availability and future value of their collectibles.

Determinants of Demand

The determinants of demand are factors that can shift the demand curve for a product such as an autograph. These determinants include consumer preferences, income levels, availability of related goods, and expectations of future prices among others. In our textbook example, Mickey Mantle's autographs have a high demand due to several reasons: his enormous popularity, the superior performance of the player during his career, the nostalgia associated with his era, and the perceived investment potential of his signed items.

When demand increases, like in Mantle's case due to his rank as the third most-popular autograph, the demand curve shifts to the right, resulting in a higher equilibrium price. This is in contrast to Whitey Ford, whose demand curve is lower due to less popularity, shifting less to the right and thus, settling at a lower equilibrium price. Understanding these determinants helps collectors predict which autographs might increase in value over time.