• Supply and demand movie theater tickets

    The Reason I Will Return to My Local Movie Theater

    Jul 8 • Businesses, Entertainment, Innovation, Lifestyle, Tech • 154 Views

    I usually avoid going to my local AMC movie theater. Decades old, it has had a decaying lobby, saggy seats, and a rather worn-out feeling. Several weeks ago, though, as the only place with a good time to see Chef, I went there. And I was pleasantly surprised.

    Fully reclining and really wide, my seats were a pleasure! This is what they looked like:

    Supply and demand reclining seats

    The second largest movie chain in the US, AMC has decided that the way to reverse declining demand is with reclining seats. Because the reclining seats are massive, their installation requires eliminating up to two-thirds of an auditorium’s seating capacity. Even with the cost at $350,000 to $500,000 per renovation, AMC has decided that “less is more.”

    Recining movei theater seats affect supply and demand

    With entertainment alternatives multiplying, the problem for movie theaters has been other sources of demand. We are staying home to watch Netflix and have no need to go to the movies when we leave home.

    However, the “reseated” theaters seem to be changing our demand. They attract more adults, a mid-week audience, and for me, are a comfy way to watch a movie that is better than my couch. During the “seeding” times, at the 37 AMC theaters that have been “reseated,” box office revenue spiked by 60% and attendance, by 80%.

    Analysts expect AMC to increase ticket prices at reseated auditoriums by $1. The average now is $8.13. Obviously, AMC does not expect that buyers’ demand will become elastic at a $14.00 ticket price.

    Supply and Demand Movie ticket prices

    From: WSJ

    The company notes that only venues with attendance problems will enjoy the renovation. Most NYC theaters, for example, fully utilize their seating capacity. If AMC were to install recliners and eliminate two-thirds of all seats in NYC, their revenue would sink.

    Our bottom line: Supply and demand are affected by reclining seats at movie theaters. On the supply side, because wider movie seats increase a firm’s expense, the impact should be a decrease in supply. Meanwhile though, for the demand side, there is an increase in the number of movie tickets people are willing and able to buy. The result? Less supply, more demand and more expensive tickets.

    Supply and demand movie attendance recliners

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  • Indian development and tradeoffs from roads and cars

    The Difference Between India’s Stories and Statistics

    Jul 7 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Environment, Government, Households, Innovation, Labor, Lifestyle, Thinking Economically • 126 Views

    There is a village in Southern India called Kadapakkam. It had been a home to farmers and fishermen whose thatched huts had no running water and no electrical appliances. At traditional tea shops located at the side of the local, narrow and potholed road, you could meet a friend. One 62 year-old postman spoke of getting married at home. He had no music, no photographer, and they ate sitting on the ground. As for a dowry, you paid what you could afford.

    Where are we going? To the impact that a new 435 mile highway (700 kilometers) had on Kadapakkam’s development.

    Business boomed. As a place to stop along the new East Coast Road that stretched across the entire state of Tamil Nadu, Kadapakkam found itself with new air conditioned coffee shops and commercial establishments that sold Armani, Adidas and pizza. Agricultural acreage diminished as land became more valuable. Concrete homes were built with washing machines, refrigerators and televisions. Cell phone towers multiplied. One photographer explained that new marriage halls along the road vastly expanded his business as did the accessibility of distant places. One tea shop owned by the same family for 58 years had more customers than ever before.

    Quickly though, the village culture changed. The 62-year old postman said he was no longer respected. People were becoming more “money-minded.” You could pay 50 rupees for a cup of tea at a coffee shop or 8 rupees at a traditional tea shop. Tension had intensified. There was more noise and pollution. One man said, “Old is gold, and you should never forget the past.”

    The graph below shows the increase in car ownership in India.

    Emerging Markets India Development and Cars

    From: Quartz While the increase in rural car ownership in places like  Kadapakkan looks relatively small, the proportional increase is much greater than for urban areas.

     

    The number of households with motorcycles and other 2-wheelers has also soared:

    Indian development, cars and two-wheeled vehicles

    From: Quartz

    Our bottom line: Kadapakkam is an Indian development story. Told through statistics, development involves more cars, more appliances, healthier diets. A story of one village, though, conveys the economic, cultural and environmental tradeoffs.

     

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  • Federal Budget spending categories

    A Speedy Summary of Spending in the US Federal Budget

    Jul 6 • Economic Debates, Economic History, Government, Macroeconomic Measurement • 100 Views

    Right now, the Congress is supposedly debating the 2015 federal budget. Because the new fiscal year begins October 1, their deadline is September 30.

    But not really.

    1996 was the last time the House and Senate punctually approved all necessary appropriations bills. Instead, using an array of alternatives like continuing resolutions, the Congress has funded spending but not through a formally passed budget.

    I’ve selected the following infographics from the Congressional Budget Office (CBO) to show why it is so tough for them to agree on the spending cuts that many of us believe are necessary.

    First, what are the 4 big budget categories?

    Federal budget categories

    The biggest part of spending is mandatory. The law requires the Congress to spend those dollars–57% of the 2013 budget. And they do not even include the interest we have to pay on our debt and defense.

    Federal Budget size of categories

    Below, you can see where our mandatory spending goes. Health…Social Security…the Military…Doesn’t it make sense that no one touches so large a part of the budget?

    Federal Budget Mandatory Spending

    On the other hand, non-defense discretionary spending–a much smaller proportion of the budget–is easier to cut.

    Federal Budget discretionary spending

    And that takes us to a debt–all that we owe– that is growing because the deficit–the yearly budgetary shortfall–has not been substantially sliced.

    Sort of like comparing your income to your mortgage to decide whether you have borrowed too much, we can compare our GDP to the national deficit and debt.

    Federal Budget debt and deficit

    Our bottom line: Told that they have cut spending, the Congress has achieved little success. Looking at the bigger budget picture, we can see that it is tough to cut spending because entitlements, defense, and interest on the debt compose most of the outlays.

     

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  • everyday economics

    Our Weekly Roundup: From Prop 8 to Alexander Hamilton

    Jul 5 • Demand, Supply, and Markets, Thinking Economically • 172 Views

    An Econlife roundup for the week

    This week same-sex marriage and human capital, natural gas and opportunity cost were some of the ways we connected everyday life with economics.

     

    everyday economics and human capital06.30.14 The battle against Prop 8 was about more than validating same-sex marriage…more

     

    everyday economics and African development07.01.14 Looking at programs targeting extreme African poverty, we asked how to give people the boost they need to reach the first step of development…more

     

    everyday economics and the opportunity Cost of Natural Gas07.02.14 The fracking debate takes us to opportunity cost and the environment, the economy, and home-rule…more

     

    everyday economics and cranberries07.03.14 Not just sauce, juice, or sugary and dried, cranberries are a supply and demand story…more

     

    everyday economics and Alexander Hamilton's development plan7.04.14 Let’s celebrate economic independence and say thanks to Alexander Hamilton on Independence Day…more

    Our bottom line: Slicing away all of the complexities of economics, we wind up with ideas about production, distribution and tradeoffs that help us better understand our everyday lives.

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  • everyday economics and Alexander Hamilton's development program gave the US economic independence

    Celebrating Economic Independence

    Jul 4 • Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Financial Markets, Government, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation • 140 Views

    Yes, the United States declared independence from Great Britain on July 4, 1776 and won the American Revolutionary War. But still, we were not truly independent.

    George Washington’s Secretary of the Treasury Alexander Hamilton knew that true independence required a vibrant economy. He had to diminish our huge debt, create a banking system, and diversify what we produced. To deal with so troubled an economy, Hamilton submitted a development plan to the Congress. In 3 separate reports, he explained how to establish public credit, create a national bank, and encourage manufactures.

    Public Credit

    • Countries need good public credit in order to borrow money at reasonable interest rates. Sort of like you and me, the only way to get good credit is having lenders know you will pay them back. With the US sovereign debt owed partially to Europeans who had funded the Revolutionary War, Hamilton had to reassure them that they would get all of the money that was due them. Domestic creditors also needed to hear that Hamilton had a viable plan. Only then could Hamilton establish the good credit that was necessary for sound finance. Since then, the U.S. has never defaulted on its sovereign debt.

    Banking

    • Composed of financial intermediaries that connect savers to borrowers, a banking system facilitates economic expansion. Banks loan money to business start-ups and help them finance inventory, banks purchase the bonds that nations sell to raise money, and banks expand the money supply. By establishing the First Bank of the United States, Hamilton generated the beginning of a banking system that continued to grow and support US economic independence.

    Diversified Production

    • Economic diversity was the third leg of Alexander Hamilton’s plan for economic independence. Recognizing that the US in 1790 was a farming economy, he sought to create a complementary manufacturing sector. Correct again, Hamilton knew that the combination of agriculture and manufacturing meant we would not have to rely on others for our necessities. Through tariffs that would protect infant industries in the US and incentives that would encourage their creation, he stimulated business people to diversify.

    Our bottom line? Isn’t it interesting that Hamilton’s goals–managing sovereign debt wisely, producing a vibrant banking system and encouraging productive diversity–remain leading economic issues?

     

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