Question

Determine which of the demand curve shifters (PYNTE) would apply to each situation. Explain whether the event will increase or decrease demand for movie tickets. Tell whether the demand curve shifts to the right or to the left.

a. A decrease in the incomes of consumers of movies.

b. An increase in the price of Red Box movie rentals.

c. An increase in the number of consumers in the market for movies.

Answer 1

a. A decrease in the incomes of consumers of movies.

When income of a consumer falls, his expenditure on all major normal goods falls as well. Considering movies to be a normal good, a decrease in income will decrease the demand for movies so that demand will shift to the left.

b. An increase in the price of Red Box movie rentals.

These channels are a substitute for movies so if the price of subtitute rises the quantity demanded will fall and so the consumers will watch more movies. This will increase the demand for movies so that demand will shift to the right.

c. An increase in the number of consumers in the market for movies.

More consumers will demand more movies at the same initial price. Hence it will increase the demand for movies so that demand will shift to the right.