Monday, March 29, 2010

Demand Curves Slope Downward, Apparently

In an article in today's edition of The Wall Street Journal titled "Theater Chains Pricing for Slow Growth", (subscription only, but plug the title into your browser and you may find an accessible version) we find out that demand curves slope downward. Yet, there are people running movie theater chains who don't seem to understand that idea. They seem to think the remedy for falling attendance is to raise ticket prices.

You can even use this article to discuss substitutes because cable, online and DVD sales are viewed as cheaper alternatives. And because the article points out that as much as 40% of a theater’s chain comes from the sale of concessions, you can discuss compliments (think popcorn). This Econtalk interview with Richard McKenzie touches on movie prices and compliments. Start about the 48 minute mark.

Please share your thoughts.

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