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September 22, 2014

Homework Help: Managerial Economics

Posted by Sharon Williams on Thursday, May 24, 2007 at 11:26pm.

I need help with understanding this analysis. Suppose you are a stock market analyst. At Disney tourism has slowed down in the US. But at Six Flage two new rides are now operating. Using demand and supply analyss, predict the impact of these events on ticket prices and attendance at Disney. Now Disney has slashed ticket prices and attendance was somewhat slower. Is this consistent with prediction using demand and supply?

I believe the facts you stated are all consistent. Start by drawing initial supply and demand curves for attendence at Disney. P is the price of admission, Q is attendence.

Given Fact 1) tourism has slowed down in US. Ergo, demand for Disney shifts in.
Given Fact 2) Six Flags has new rides. As Six Flags is a substitute for Disney, more people will go to Six Flags and less go to Disney. Again shift inward the demand curve for Disney.

Given the two facts what would you predict about P and Q at Disney? Obviously, P goes down, Q goes down.

Thanks so much, but one thing If I should have to graph this out, what will it look like, I was curious.

Like a typical supply and demand curves, where the demand curve is shifted inwards -- two times.

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