Question

Disney raises theme park ticket prices, again. You've got to pay more to play in the Magic Kingdom, because Walt Disney just raised its ticket prices again, breaking the $100 mark. A one-day ticket to the Walt Disney World Resort's flagship theme park, the Magic Kingdom, now costs $105, up from $99. Prices had been jacked up by $4 just last year. The price of admission applies to anyone 10 years and older entering the Orlando-area theme park. Younger children, aged 3 to 9, pay $99 to enter the Magic Kingdom, compared to $94 last year. Prices also increased for the other Disney World theme parks -- EPCOT, the Animal Kingdom Park and Hollywood Studios -- to $97 for visitors aged 10 and older, compared to $94 last year. Children aged 3 to 10 now pay $91 for a single-day ticket to those parks, compared to $88 last year. The price hikes seem to be working for parent company Walt Disney World Resorts, which reported a 7% increase in revenue year-over-year, largely from its parks. "Increased guest spending was primarily due to higher average ticket prices for admissions at our theme parks," Walt Disney Company (DIS) said in a financial report. A Disney spokeswoman said the "vast majority" of visitors buy the multi-day passes, which can knock the price down to $96 per day for a two-day ticket, or $63 per day for a five-day ticket. She also said that a ticket for a single day at Walt Disney World buys 16 hours of entertainment.

1. What is the price of a one-day ticket to the Magic Kingdom?

2. Given the income elasticity of demand how do we know if a trip to Disney World is a normal good or an inferior good?

3. The news article tells us that with ticket prices rising, revenue is increasing. What does this tell us about the price elasticity of demand of a trip to Disney World?

Answer 1

1. The price of one day ticket to the Magic Kingdom is $105.

2. Given the income elasticity of demand it can be said that a trip to Disney world is a normal good and not inferior good. This is because as mentioned in the passage as the price of the ticket was rising the revenue of Disney world was also rising. This indicates that more and more people were preferring the trip to Disney world. Thus this would indicate that with the Increase in income, the demand for the trip to Disney world Increase. When the demand of a good Increase with the Increase in income it is a normal good.

3. The news article tells that with the Increase in the price of tickets, the revenue was also rising. This means that as the price of ticket Increase the demand for the trip also increased. With this, it can be said that the price elasticity of demand is inelastic for this trip. A change in price lead to the change in total expenditure but both move in the same direction.

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