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The Law of Demand at Disneyland When Ticket Prices Decrease

Suppose you are a stock market analyst specializing in the stocks of theme parks, and you are examing 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.

Solution Preview

We need to look at a few different things in this scenario. News reports and analyst calls show that tourism is slow in the U.S. and a major competitor is opening new rides that have likely gotten a lot of publicity to peak consumer interest. As a result, a higher percentage of consumers will want to visit the new roller coasters at the competitor's theme park. This will mean that more consumers will be saving to spend their money on their tickets instead of ours. Most consumers don't visit more than one theme park during a specified time (summer vacation, ...

Solution Summary

This solution explains why price and output fell at the same time at Disneyland, and discusses if the law of demand is being violated due to the economic circumstances.