# Financial mathematics: find benefits

1. Mar 22, 2014

### 939

1. The problem statement, all variables and given/known data

City "A" wants to measure benefits of a stadium it built. Currently admission is free and 10 000 people per month visit the stadium.

In a comparable city, a similar stadium charges $5 for admission and receives 2000 visitors per month. Assume a linear demand curve goes through these two points. Estimate the gross benefit of the stadium in city "A". 2. Relevant equations N/A 3. The attempt at a solution Method: 1) Linear line is drawn with both points, i.e. (0, 10 000) and (5, 2000) on it; 2) Draw a horizontal line from the linear line to the y-axis; 3) Find the area. But I am not sure if this is the right method. Does anyone have any idea what method could be used? There was nothing else said in the question. Last edited: Mar 22, 2014 2. Mar 22, 2014 ### mfb ### Staff: Mentor Okay. Where, how? Area of what? How is gross benefit defined in your course? 3. Mar 22, 2014 ### 939 Area of the triangle of "benefits" shown above. The area above price and below the demand curve. "Consumer surplus" and "producer surplus". But because there is no supply curve, I assume we can just find consumer surplus and call it benefits. 4. Mar 23, 2014 ### mfb ### Staff: Mentor Why did you draw it at ($5, 2000)? This point is nothing special.

Okay, I agree.