Movie tickets and popcorn are complementary goods. The price of corn, a good used in the production of popcorn, has fallen in price. Simultaneously, the rise of at-home streaming services have led movie theaters to decrease the amount of movies they offer. What is the result of these two events on the market for movie tickets?
A. The market equilibrium quantity of movie tickets will definitely fall.
B. The market equilibrium price of movie tickets will definitely fall.
C.The market equilibrium price of movie tickets will definitely rise.
D. The market equilibrium quantity of movie tickets will definitely rise.
A. The market equilibrium quantity of movie tickets will definitely fall.
The decrease in the price of corn, a good used in the production of popcorn, will likely lead to a decrease in the production cost of popcorn. This decrease in production cost may result in a decrease in the price of popcorn.
At the same time, the decrease in the amount of movies offered by theaters due to the rise of at-home streaming services may lead to a decrease in the demand for movie tickets.
Based on these two events, we can infer that the decrease in the price of an input used in the production of a complementary good (popcorn) and the decrease in the demand for movie tickets may result in a decrease in the market equilibrium price of movie tickets (option B).
Therefore, the correct answer is:
B. The market equilibrium price of movie tickets will definitely fall.
To determine the result of these two events on the market for movie tickets, we need to analyze the impact of each event separately, and then consider their combined effect.
1. Fall in the price of corn (used in production of popcorn):
When the price of corn falls, the cost of producing popcorn decreases. As a result, movie theaters may be able to reduce the price of popcorn, making it more affordable for consumers. This decrease in the price of a complementary good (popcorn) could potentially increase consumer demand for movie tickets.
2. Decrease in the amount of movies offered by theaters due to the rise of at-home streaming services:
With the increasing availability and convenience of at-home streaming services, movie theaters have experienced a decline in demand. To adjust to this change, theaters may reduce the number of movies they offer. This decrease in supply could potentially lead to a decrease in the quantity of movie tickets available in the market.
Considering the combination of these two events, we can expect the following outcome:
Option D (The market equilibrium quantity of movie tickets will definitely rise) is unlikely because the demand decrease due to the decline in the number of movies offered may offset or outweigh the potential increase in demand resulting from the lower popcorn prices.
Option A (The market equilibrium quantity of movie tickets will definitely fall) seems more plausible, as the decrease in supply due to the decline in movie offerings may result in a lower equilibrium quantity.
Therefore, the best answer is A. The market equilibrium quantity of movie tickets will definitely fall.