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Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn
Edition 20ISBN: 978-0077660819Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn
Edition 20ISBN: 978-0077660819 Exercise 2
Describe the graphical relationship between ticket prices and the number of people choosing to visit amusement parks. Is that relationship consistent with the fact that, historically, park attendance and ticket prices have both risen Explain.
Explanation
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If the ticket prices were very low, then people will be more willing to visit the amusement park. On the other hand, when the prices of tickets are very high then, chances are less that people will afford to go to the park, and, thus, the number of people visiting the park will decrease. Here, we are holding everything constant apart from the price of the ticket. When the park has high ticket prices and when it has low ticket prices then, the graphical relationship between ticket prices and number of visitors should be one that exhibits an inverse relationship, or a relationship where as prices go up, number of visitors will go down. We can depict this relationship on a graph, showing that the lower the price, the more visitors (or the higher the price, the less visitors).
This is not consistent with the fact that both park attendance and ticket price have risen historically. This, however, is not a reason why economic theory fails, but the assumption we have of holding all else constant probably does not hold in this case. The reason for this is, parks are constantly employing new technology and innovation to make the experience of visiting better, and in that case we can see an increase in both ticket prices (the parks have to charge more because they had to put in new rides or technologies) and in visitors (since visitors are willing to pay more for things that are newer and more fun).
This is not consistent with the fact that both park attendance and ticket price have risen historically. This, however, is not a reason why economic theory fails, but the assumption we have of holding all else constant probably does not hold in this case. The reason for this is, parks are constantly employing new technology and innovation to make the experience of visiting better, and in that case we can see an increase in both ticket prices (the parks have to charge more because they had to put in new rides or technologies) and in visitors (since visitors are willing to pay more for things that are newer and more fun).
Microeconomics 20th Edition by Campbell McConnell, Stanley Brue,Sean Flynn
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