Celebrity apprentice

I was watching celebrity apprentice the other day, and the task that the celebrities had was to sell as many cupcakes as they can in a given amount of time. I was thinking that if it were us normal people selling cupcakes, the demand would be reasonably low, especially because we would have to sell the cupcakes in the middle of the street. But because these people were well known, the demand for the cupcakes was much higher, and they would inevitably make much more money. Also, there aren't too many people selling cupcakes in the street, so in a way, they had a little monopoly going on, because there weren't any competition, and they didn't have to be price takers.

The supply was somewhat constant, because they had a given amount of time to make cupcakes, and however many they made, they hoped to sell it all, so the supply curve would be vertical. With the supply curve being vertical, normally one would expect the price to be where the supply curve met the demand curve, but once again, this is somewhat of a special case because not all cupcakes had to be sold at the same price. The celebrities called lots of friends, and some people spent as much as $10,000 on a single cupcake. In essence, the celebrities were selling the cupcakes at their marginal demanded prices, so selling according to the prices along the demand curve. Some people were willing to pay much higher for the cupcakes, and the celebrities sold their cupcake according to everyone's prices. This minimizes consumer surplus and maximizes supplier surplus. This made sense, because the goal was to raise money for charities, so all the surpluses went into these charities.

In the end, one group of celebrities ran out of cupcakes, so had they made more cupcakes, or increased the supply, they could have made more money. This also meant that they weren't charging enough for their cupcakes. Because the supply was vertical, they had to set the prices so that it efficiently rations the supply that they had, and by setting the price too low, a shortage was created, and some deadweight loss were created as a result.

Overall, I think the celebrities raised over $100,000, so shortage or not, it was still a big sum of money for charity.