South-Western College Publishing - Economics  
It's All Uphill for Most Ski Resorts
Subject Comparative statics
Topic Supply and Demand, Equilibrium
Key Words Sales, depreciation, dollar, prices, rebates
News Story

Snowfall is dramatically lower this year: for example, 49 percent below normal in Colorado and 61 percent below normal in Utah. The temperature in the Northern Hemisphere is the second highest ever, making snowmaking difficult. La Nina is blamed.

Some ski slopes cannot open, others have a limited number of runs open. Lift-ticket sales are down. Those slopes that are open are crowded.

Skiers are responding by canceling trips or going elsewhere - to places such as Europe and Canada, as well as to other ski slopes in the U.S. Canada has profited not only from higher snowfall amounts, but also from the depreciation of the Canadian dollar, which has made Canadian trips cheaper.

Resorts are fighting back. Some are reducing lift ticket and accommodation prices, and a few offer rebates on future ski vacations if the snow is inadequate this year. Others picture current snow levels on their web sites, and are marketing their resorts more aggressively.

(Updated February 1, 1999)

Questions
1. Draw a supply and demand diagram of the market for U.S. ski trips. Mark the initial equilibrium price and quantity
  a) Less snow has fallen this season than usual. How has this affected the curves on your diagram? Explain and illustrate.
  b) The Canadian dollar has depreciated, making ski vacations in Canada cheaper. How has this affected the curve(s) on your diagram? Illustrate.
  c) What has been the overall consequence for the number of ski trips taken?
  d) The news story indicates that the prices of ski trips have been reduced. What does this imply about the relative movements of the demand and supply curves?
2. Ski resorts are trying to retain their business through various measures.
  a) On a new diagram of the market for ski trips, show how pictures of snow on resort web sites combined with snowmaking affect the equilibrium price and quantity.
  b) Why is the effect on the equilibrium price uncertain?
3. Draw a diagram of the market for ski trips in Canada. Mark the initial equilibrium.
  a) What is happening to the equilibrium price and quantity of ski vacations in the wake of the depreciation of the Canadian dollar? Illustrate on your diagram.
  b) Which determinant of demand or supply is changing?
Source Nancy Keates, "Flake Out: Ski Season Off to Slow Start," The Wall Street Journal, January 7, 2000.

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