Cineplex Odeon

The Economics of the Movie Business

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Wednesday, March 23, 2011

Demand

Being a senior student means:
You love seeing movies
especially at movie theaters like CINEPLEX ODEON.


You may grudgingly pay around $12 for a ticket, but a movie is a movie, and you are generally guaranteed a good time. 
This is the element of Demand.  If refers to the various quantities of a good/service that people will be willing and able to purchase at various prices during a period of time.  
But what if the price of a movie suddenly skyrocketed to
$25?
$30?
Or consider if your usual Small Popcorn went from $4.75 to $8.00 instead. 
As the price of a product goes DOWN, the quantity demanded increases, and as the price of a product goes UP, the quantity demanded decreases.  However, movie theaters raise prices MINUTELY.
Looking at the prices of movie tickets/food, someone may think twice about seeing the newest flick...especially if the movie isn't "worth it".

Note: there is an inverse relationship between price and quantity demanded


The factors that shift demand include:

Income:


If you receive a pay increase, your demand for movies will increase because you can be more frivolous with your money
OR
If you have a pay decrease, your demand for movies will decrease because you likely can't afford to spend money on entertainment.

Prices of Related Goods:


1) Substitutes: goods that can replace each other e.g Large Popcorn + a Small Fries both=$5.00
The price of Popcorn increases, so the demand for Fries increases
OR
The price of Popcorn decreases, so the demand for Fries decreases.

2) Complements: goods that go together e.g. Chocolate Bar + some Candy
The cost of Chocolate Bars decreases, so the demand for Candy decreases
OR
The cost of Candy increases significantly, so the demand for Chocolate Bars increases.

Tastes/Preferences:


Consumers want to see the newest action/romance/drama/comedy movie, so demand for movies increases
OR
There aren't any "good" movies coming out, so demand for movies decreases.

Expectations:

VS.

It's July and theatres are preparing for Harry Potter and the Deathly Hallows Part II to come out, so demand for tickets increases
OR
For 4 months, theaters only show movies that appear "stupid", "boring", or "lame", so demand for tickets decreases.

 Population:


More people (especially senior students) move to your town/city, so demand for a movie theater increases
OR
Many senior students in your town/city move away to attend college/university/work, so demand for a movie theater decreases.

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