CASE STUDY Supply, Demand, and the Cost of Super Bowl Advertising During 364 days out of the year, the average cost of a 30-second prime time television advertisement spot is a little over $100,000. But for one four-hour block. on one day, on one channel each year, the price skyrockets to around 53.5 million That time slot is the Super Bowl. Like most prices in a market economy, the price for television advertising is set by supply and demand. Advertisers want to reach the largest number of viewers with each ad, so demand is high for ad space during a program lots of people are watching. And few programs are watched by more people than the Super Bowl, which averages over 100 million viewers each year. Because demand is higher for ads during the Super Bowl, the supplier (the television station airing the game) can charge higher prices than for other programs. The limited supply of ad space also plays a role in sending the price higher In 2013 there were only 70 slots available to sell. In the end, all of the ad space available during the game is filled, because the television station won't charge a price so high that advertisers are unwilling to pay. They charge the price that makes them the most profits givevn the supply and demand for the available advertising spaces. One Year in Super Bowl Ads (2013) Number of viewers: 108.4 million Percentage of U.S. households tuned in: 46.3% Number of 30-second advertising spots sold: 70 Top price paid for one 30-second ad: $4 million Ad space was sold out 3 months before the game aired Average cost of a 30-second ad: $3.5 million Case Study Review 1. Explaining What makes the equilibrium price for an advertisement during the Super Bowl different from the normal equilibrium price for a television advertisement? 2. Making Predictions What conditions might lead to a shortage of Super Bowl advertisements? What effect might a shortage have? 3. Defending Do you think pricing for Super Bowl advertising is fair? Explain your reasoning