Assignment Overview:
Answer 1.
The creation of successful movie influence what term in two ways. One is that the movie created is a successful movie. Second, that the movie will give higher profits to the maker and therefore the similar movies will be made in the future. The how question is influenced by the methods of production of goods and services. Hence, successful movies created by using different production method such as special effect and others by using higher budget. The for whom question is influenced by creation of successful movie because a successful movie gives higher profit to those who are involved in its business and thereby increasing their income for such movies in future also.
Answer 2 .
The creation of a successful movie raises the personal income of those involved in it. Hence the creation of successful movie is driven by self interest of the makers. On the other hand, successful movie also increases the entertainment in the society by increasing the quality and quantity of the entertainment available in the society. Thus the self interest of creating a successful movie for higher profits results in fulfilling social interest also.
Answer 3
An incentive to watch movie in China can be the quality of movie
The benefits of watching movie in China are as follows :
– The movies with special effects
– Less crowded Cinemas
– 70% discount on online buying
The costs involved in the decision are
– Higher prices
– Less satisfaction due to higher prices
It would not be rational to pay high prices for the same utility from the movie with lower prices.
Answer 4 .
a) Yes, I faced a trade-off. The trade-off was between the pleasure I got from the movie I watched and the test score.
b) The opportunity cost of going for a movie was a fall in the test score. The 20 per cent forgone marks are the opportunity cost of the movie.
Answer 5
a) The law of demand is a macroeconomic law which states that an increase in price of goods and services reduces the demand of them, while other things like income, price of other goods, etc remain constant. Thus law of demand states that the demand of a good or service and its price are inversely related.
The law of demand applies to movie tickets price as the price of movie ticket increases the demand for movie tickets or the number of people going to movie goes down. As the case facts shows when the price of movie tickets in China went up, many seats are empty in cinemas.
b) Substitution effect is the effect of price rise on the demand of similar goods. When there is a price rise , the consumer shifts their demand to less costlier goods rather than buying the same good or service with the increased price. For example X and Y goods are substitute of each other. Hence when the price of X rises ,consumer demand increases for Y good because now Y is cheaper than X good or service.
When the prices of movie tickets are increasing , the consumers may shift their demand towards other alternatives of entertainment such as beach, books, watching at home etc.
c) Income effect is the change in demand due to change in consumers’ disposable income. When there is an increase in disposable income, the consumer demand goes up and when there is a decrease in consumer’s disposable income, the consumer demand goes down. Thus income effect shows a direct relation between income and consumer demand (Duesenberry,1949). The income effect also changes the composition of basket of consumer. The portion of high quality goods and services increases with an increase in the disposable income. When the price of movie ticket rises , the demand from higher income group will be more .
d) Factors that might increase demand for movie tickets are as follows :
– Increase in income: If there is an increase in income the demand for movie tickets may rise. It will increase the demand even if the price of tickets goes up.
– Decrease in ticket prices : If ticker prices are lowered then demand for movies will increase.
– Decrease in taxation: If there is a decrease in VAT or other taxes applicable on movie tickets it will reduce the price of the tickets and thereby it can result in increase in demand.
– Increase in population of movie goers: If there is an increase in the population between age 20-50 then there will be an increase in the demand of movies.
– Lack of substitutes: If there is no better substitute for movies then even if prices of movie tickets are high, the demand will increase.
– Creation of high quality movie: – If the quality of movie is higher such as movies produced with special effects, it will increase the demand for it.
– Increase in publicity: – If movies are highly publicized, the demand for movies will increase.
– Increase in number of theatre :- Increase in number of theatres will increase the accessibility of movies and thereby increase the demand for movies.
Answer 6
The law of supply states that when there is increase in price of goods and services , the supply of goods and services goes up while other things remaining constant. Similarly , when there is a decrease in price of goods and services, the supply of goods and services will go down. When there is a rise in the price of movie tickets , the supply of movies will go up, as more and more producers will be interested due to attractive profitability of cinemas.
Answer 7
An elastic demand means change in demand with every change in the price of the good or service. Whereas, inelastic demand means no change in demand with any change in price of the good or service.
There are 5 types of price elasticity of demand.
Elastic: – change in demand is greater than change in price
Inelastic: change in demand is less than change in price
Unitary: change in demand is equal to change in price
Perfectly elastic demand: demand goes to zero with an increase in price and vice versa
Perfectly inelastic demand: demand does not change with any change in price
The demand for movie ticket is inelastic that is change in demand is less than change in price.
REFERNCES
Duesenberry, J.S., 1949. Income, Saving and the Theory of Consumer Behavior. Harvard Univ. Press, Cambridge, MA.
A. K. David and Y. Z. Li(1992). “Consumer Rationality Assumptions in the Real-Time Pricing of Electricity,” IEE Proceedings, pt. C, vol. 139, no. 4, pp. 315–322.
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