We are in a recession, let’s go to the movies!

http://www.cbc.ca/money/story/2009/11/10/cineplex-quarterly-earnings.html?ref=rss

We are in a recession, let's go to the movies! Introducing Cineplex's increase in revenue because of an increased demand for movies. The article states that the total revenue for Cineplex has increases by 7.7 percent from $239.1 million to %257.5 million and the attendance went up by 4%; a change in demand. The price of movies has stayed the same but the attendances have increased, thus shifting the demand curve to the right, seen on this graph. There has been an excess supply of seats, creating disequilibrium, because the revenue has increased but the price has stayed constant. Due to increased demand the demand curve, D, moves to D1 creating equilibrium and a decreased excess supply of seats.

Continuing, 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 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 QD3 lower the price to Pe2.

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. Demand for restaurant meals, normal goods, decreases during a recession. Movie tickets, on the other hand, represent a relatively cheap form of entertainment, meaning their demand will increase during a recession, an inferior good. In this article movies are represented as inferior goods because they are cheaper substitutes for restaurant meals, furthermore, a consumer can still have a night out, but only eating cheaper dinner at home then going to a movie instead of going to a restaurant and a movie, spending over $100 a night.

Interestingly, 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 demand, D, has shift the curve to the right, D1. This moved the quantity demanded from Qe to Qe1.

At the moment, Cineplex has a decreased amount of excess supply because the demand has gone up but the price has stayed constant, indicating an excess supply of seats. In the short run, Cineplex is able to sustain the increasing demand for movies, an inferior good, during the recession. In the long run, if demand continues to increase Cineplex has might decide to build new theatres to sustain the increasing demand, making the supply more elastic. Since the Cineplex's resources are invariable in the short run, Cineplex might decide to raise its price to lower demand if it cannot sustain the increasing demand for movies.