Question

The latest data from the movie studios reveals that attendance at movies has declined as well as the average ticket price. How could this have possibly happened? 1. There was an increase in demand and no change in supply. 2. There was a decrease in demand and an increase in supply. 3. There was no change in demand and an increase in supply. 4. There was a decrease in demand and no change in supply. 5. There was no change in demand and a decrease in supply.

Answer 1

Answer:

(2) There was a decrease in demand and an increase in supply

Explanation:

For a movie studio, a decline in attendance suggests that demand for showtime (movies) had declined. If demand had increased, there would have been an increase in attendance at the movies. If demand had remained the same, attendance would have remained unchanged too with no increase or decrease.

However, the decline in the average ticket price suggests that supply of movies had most likely increased (it could also be the case that studios decrease prices in a bid to attract customers in the face of dwindling demand). An increase in average ticket price would have suggested that lower movies were available or demand was higher than supply.

Answer 2

Answer:

2. There was a decrease in demand and an increase in supply.

Explanation:

If the latest data from the movie studios reveals that attendance at movies has declined as well as the average ticket price, then this could possibly have happened as a result of 2 things:

1. A DECREASE IN DEMAND: This is very obvious because it is stated clearly that 'attendance at movies have declined'' that means people no longer go to movies as they used, at least some people may not even be going anymore.

2. INCREASE IN SUPPLY: The second reason might be less obvious but it can be recalled that one of the major reasons in economics that triggers a price drop is 'increase in supply'. In the scenario, the fact that average ticket price across board have declined points more in the direction of increase in supply.