Hotdogs are very cheap at the grocery store-about $2 for a package of 8, or 25 cents each. At a baseball game they cost $3 each. Use the concept of price elasticity of demand to explain why.

What will be an ideal response?

At the grocery store there are many substitutes for hotdogs, including other foods and restaurant meals. At the baseball game there are fewer substitutes for hot dogs, and even fewer substitutes that are hot since one cannot cook one's own food in the stadium. Therefore grocery store hotdogs likely have an elastic demand, which means lower prices maximize profit. Baseball game hotdogs have an inelastic demand, which means that higher prices maximize profit.