Question 1

Despite the economic downturn in the U.S, the year 2009 saw the sale of movie tickets rise by 4.5% as compared to 2008. Many Americans cut down on their spending in order to navigate through the hard economic times. The economic meltdown prompted Americans to cut spending on leisure activities like sporting affairs, eating out in restaurants, and travelling. This left the Americans with no choice but to attend to movies as a means of entertainment. The price of the movie tickets went up, but people opted to go to the movies instead of other entertainment areas which proved to be more expensive.

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Question 2

The increase in the sale of the movie tickets was a consequence of shift in the demand curve. Generally,an increase in the price of other entertainment activities led to the demand curve shift. Sporting activities, eating out in restaurants, and shopping comprise some the entertainment activities which form substitute services to going out to movies. The increase in the price of these substitute services resulted in an increase in the demand of movie tickets.

Question 3

Decrease in the price of eating out in a restaurant will lead to a decrease in the demand of movie tickets. Eating out in a restaurant and going for a movie are services which substitute each other. An increase in the price of either service will lead to an increased demand for the other service. A reduction in price of eating out in restaurants reduces the supply of the service.

Question 4

An increase in income will lead to a change in priority of leisure activity. Going to movies can be considered to be an example of an inferior good. An increase in people’s income decreases the demand of movie tickets. The demand of other substitute services increases with an increase in income. It is evident that the demand for movie tickets increased when people’s income reduced.

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