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Popcorn Margins

Sep 28, 2010 • Businesses, Demand, Supply, and Markets • 136 Views    No Comments

Higher quality film? Better projectors? Online ticketing? No. The “most important technological innovation since sound” was the armrest cup holder (according to a movie theater owner).

Please think about a cup holder. The cup holder makes huge popcorn buckets manageable. With other revenue sources less lucrative, popcorn and other snacks have become the key to profits. Also, through extra salt, popcorn enables theater owners to generate extra soda sales.

That takes us to one other extra. Calories. At 1600 calories, a medium bucket of popcorn has the same number of calories as 3 quarter pounders and a stick of butter. Recent health care regulation will require posting calories in movie theaters. Do you think their popcorn sales will suffer?

A note. Theater owners prefer less gripping movie stories so that people are willing to leave for more popcorn and soda.

The Economic Lesson

Economists like to say that we make decisions at the margin whenever we do more or less of an activity. For movie goers, thinking at the marginal can involve more or less popcorn, soda, and calories.

For movie theater owners, consumers’ snacking purchases become marginal revenue. The profit margin for popcorn has been 90 cents for every dollar sold.

 

 

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