Answer to Question #249461 in Economics of Enterprise for Neel

Question

Suppose you are a stock market analyst specialising in the stocks of theme parks, and you are examining Disneyland’s stocks. The Wall Street Journal reports that tourism has slowed down in the United States. At Six Flags Magic Mountain in Valencia, California, a new Viper roller coaster is now operating and another new ride, Psyclone, will be opening this year. Using demand and supply analysis, predict the impact of these events on ticket prices and attendance at Disneyland. As reported in The Wall Street Journal, Disneyland slashed ticket prices and admitted that attendance was somewhat lower. Is this consistent with your prediction using demand and supply analysis? In light of the fact that both price and output were falling at Disneyland, is the law of demand being violated in the world of fantasy?

Answer 1

Although we know that the supply of any commodity increases when the price is high, we expect the vice versa in Disneyland, where the tourists are supposed to Increase as a result of decrease in ticket price. This is because many tourists would like to tour when the ticket prices are low compared to when the prices are high.

 My prediction is not consistent with the results in Disneyland because the attendance is low and I expected it to be high.

The law of demand is violated because it clearly stated that the lower the price the higher the demand. Because the ticket price has been reduced, the demand should be high thus attracting more tourists but its turns out to be the opposite.