To analyze the impact of the two events on the market for movie tickets, let's break down the effects of each event:
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Decrease in the price of corn (a good used in the production of popcorn): This decrease can lead to a reduction in the cost of producing popcorn, which, as a complementary good to movie tickets, can increase the demand for movie tickets. When popcorn prices are lower, people may be more inclined to buy popcorn when they go to the movies, which can increase the attractiveness of going out to the theater. This could lead to an increase in the equilibrium quantity of movie tickets sold.
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Rise of at-home streaming services leading theaters to decrease the number of movies offered: This factor is likely to decrease the demand for movie tickets, as fewer movie options may lead people to opt for streaming services instead. As theaters offer fewer options, the overall demand for movie tickets may drop, leading to a potential decrease in both the equilibrium price and quantity of movie tickets.
Given these two counteracting effects:
- The decrease in popcorn prices tends to increase the demand for movie tickets.
- The reduction in the number of movies available tends to decrease the demand for movie tickets.
Overall, the net effect on the market is uncertain, as the increase in demand from cheaper popcorn may not outweigh the decrease in demand from fewer movie options.
However, the strongest conclusion we can draw is:
The market equilibrium quantity of movie tickets will definitely fall.
This is generally because the reduction in the number of movie offerings is a significant factor that would likely lead to lower attendance, despite some potential increase from lower popcorn prices. Therefore, the most appropriate response is:
The market equilibrium quantity of movie tickets will definitely fall.
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