South-Western College Publishing - Economics  
Higher Prices a Theme at Parks
Subject Market Equilibrium, Comparative Statics
Topic Product Markets
Key Words Price Increases, Costs, Minimum Wage
News Story The major theme parks in Orlando, such as those owned by Disney, Sea World and Universal Studios, have raised their admission fees by more than two dollars for adults, to over $44. Price increases have also been seen elsewhere around the country's theme parks. These price levels compare to $30.50 to enter Disney World in 1989, and $1 to gain admission to Disneyland in 1955.

The theme park owners explain that the price increases are needed to cover the cost of constructing new and innovative rides, such as the Twister at Universal Studios, and Journey to Atlantis at Sea World. It is felt that consumers are willing to pay more if there is more to do, and they will return if there are new attractions. Furthermore, the increase in the minimum wage earlier in 1998 has contributed to the rise in admission fees.

Some tourists complain about the cost. Nevertheless, the higher prices do not seem to deter visitors.
(Updated June 5, 1998)

Questions
  1. Draw a supply and demand diagram for theme park admissions. Show the equilibrium admission fee and number of admissions.
    1. Theme parks are facing higher costs. Which curve is affected by increased input costs? How is the curve affected? Why?
    2. Show the effect on the equilibrium of the higher costs.

  2. Draw another supply and demand diagram for theme park admissions. Mark the initial equilibrium.
    1. The owners of theme parks argue that consumers will be encouraged to return by new attractions, and will enjoy having more to do at the parks. Which curve do they expect to be affected? How will it change? Why?
    2. Show the effect on the equilibrium of the change in consumer attitudes toward the theme park attractions.

  3. Draw a further supply and demand diagram of the market for theme park admissions.
    1. In reality, both of the changes you have identified in Questions 1 and 2 are happening at the same time. Show the effect of both together on the equilibrium admission fee and number of admissions. Of the change in the equilibrium fee and admissions, which is certain and which is indeterminate without further information?
    2. The news story can help determine the direction of change of the indeterminate variable. Given what you have read above, which direction do you think the equilibrium moves? Why?
Source Mike Schneider, "Theme park ticket prices leave some visitors breathless," The Tampa Tribune-Times, May 24, 1998.

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