Question

Suppose you are a stock market analyst at Goldman Sachs, specializing in the stocks of theme parks, and you are examining Disneyland’s stocks. The Wall Street Journal reports that tourism has slowed down in the United States. You also find out that at Six Flags Magic Mountain in Valencia, California, a new Viper roller coaster is now opening and another new ride, Skyrush, will be opening this year. a. Use the demand and supply model, to graphically analyze and predict the impact of these events on the attendance at Disneyland. What are the likely effects on ticket prices and attendance at Disneyland? b. In the same article in Wall Street Journal, you read that Disneyland has slashed ticket prices and admitted attendance was somewhat lower. Is this consistent with your demand and supply analysis in part a?

Answer 1

The analysis can be explained with the supply demand chart below.

The initial supply and demand curve are given by "S" and "D" respectively with equilibrium price of tickets at "P" and the quantity of tickets demanded at "Q."

Based on the news and analysis, there is an impact on supply as well as demand. When the economic condition becomes relative weak and tourism has slowed down in the United States, the demand for Disneyland tickets drops. This translates into a shift in the demand curve to the left from "D" to "D1."

At the same time, Six Flags Magic Mountain in Valencia, California, a new Viper roller coaster is now opening and another new ride, Skyrush, will be opening this year. Therefore, the supply of rides similar to that of Disneyland increases and this shifts the supply curve to the right.

The overall implication is that the new demand and supply curve are given by "S1" and "D1" respectively and the price of tickets declines sharply from "P" to "P1." At the same time, the quantity demanded for tickets declines from "Q" to "Q1."

Therefore, this is consistent with the report from Disneyland on decline in prices and relative decline in attendance.