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.
To graph the impact of these events on ticket prices and attendance at Disney, you would create a standard supply and demand graph.
On the vertical axis, label it as Price (P). On the horizontal axis, label it as Quantity (Q), representing attendance at Disney.
Start by plotting the initial supply and demand curves for attendance at Disney. The demand curve slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases. The supply curve slopes upward from left to right, indicating that as the price increases, the quantity supplied also increases.
Now, given the facts you mentioned:
1. Tourism has slowed down in the US, causing a decrease in demand for Disney. This means the demand curve for Disney shifts inward (to the left).
2. Six Flags has new rides, which can be considered a substitute for Disney. This means more people would choose to go to Six Flags instead of Disney, further decreasing the demand for Disney. This causes another inward shift of the demand curve for Disney.
As a result, the new demand curve will be positioned to the left of the original demand curve. This means that at each price level, the quantity demanded will be lower than before.
Given the downward sloping nature of the demand curve, when the demand shifts inward, you will observe a decrease in both ticket prices (P) and attendance (Q) at Disney. This is consistent with the prediction using demand and supply analysis.
In summary, the graph would show an inward shift of the demand curve for Disney, resulting in lower ticket prices (P) and lower attendance (Q) compared to the initial conditions.