Koen IB Econ: Cineplex tickets boost revenue

The article Box office bonanza helps Cineplex buck recession discusses the increase in revenue for

Cineplex based on an increase in demand for movies in the third quarter.

The article states that the total revenue for Cineplex has increases by 7.7 percent from $239.1 million to

%257.5 million. The attendance went up by four percent since last year from 18 million to 18.8 million

viewers, this is an example of a change in demand. The price of movies has stayed the same but the

attendances has increased, thus shifting the demand curve to the right, seen on this graph. The demand

curve, D, shifts to the right to D1, the price, Pe1, has stayed the same but the quantity demanded, Qe,

has increased to Qe1.

According to the box office "the recession has been fantastic". In a recession consumers usually have

lower incomes, thus they can spend less money on goods and services. Restaurant meals are examples

of expensive goods, so the demand for restaurant meals, decreases during a recession, because it is a

normal good. Movie tickets, on the other hand, are cheap good, meaning their quantity demanded will

increase during a recession. This is an example of an inferior good. In this article movies are

represented as inferior goods. Movies are a cheaper substitutes for restaurant meals, furthermore, a

consumer can still have a night out, but only eating cheaper dinner at home than going to a movie

instead of going to a restaurant and a movie, spending over $100 a night.

Another interesting aspect is that the attendance of movies has gone up but the price has stayed

constant. To begin with, the movie theatre must have had empty seats, because the number of movie

theatres built has not increased because the situation is in the short run. The movie supply, S, is thus

inelastic because it takes a lot of time before a new movie theatre opens. The movie theatre is limited

to its capacity, which was not overflowing because the attendance has increased but not the price. In

this case the attendance, demand, has increased by four percent. This shifts the demand curve, D, out to

the right again to D1, because the price has stayed constant. The new quantity demanded has moved

from Qe to Qe1 increasing the price from Pe to Pe1 greatly. The supply is still inelastic because the firms

have not received enough time to react to the increase in demand thus; no new theatres have been

built yet. On the other hand, if the firm had been given enough time to react, long run, then the firm

would have built new theatres to support the increasing demand for movie tickets. The supply has

shifted from S to S1 in the long run, making it more elastic. The quantity demanded has reached Qe2

lower the price to Pe2.

Lastly, the price of concessions has gone up by 4.5 % while the attendance of movies has gone up by 4%

as well. These two goods are considered compliments for each other, because they go together. The

concessions sale especially booms when a family movie is shown, the entire family is present thus there

is an increase in demand for concessions. The firm has stated: "One thing we've been very conscious of

during the past year is we have not raised any of the prices on concessions". Again the price of

concessions has stayed the same but there has been an increase of 4.5 % demand for concessions. The

price has stayed constant at Pe but the quantity demanded, D, has shift the curve to the right, D1. This

moved the quantity demanded from Qe to Qe1.

Koen IB Econ