Thursday, July 7, 2016

Gasoline prices and how they affect many markets. Nice practice!

Here is a terrific article from the WSJ (I think it is ungated) that illustrates a bunch of introductory microeconomic concepts within the Supply and Demand unit.

This paragraph speaks mostly to the Demand-side:
“Households had the potential to save $630 at the pump, of which they spent the majority58%. This spending provided more than a $200 boost to spending on non-gas goods and services, primarily restaurants and retailers. The lower gas prices also caused significant changes in household transportation choices, leading people to spend $150 more at gas stations and spend less on transit.”---WSJ Real Time Economics
Substitutes, Complements, movement along and a shifting of various Demand curve(s).

Happy graph drawing!

Monday, July 4, 2016

Theme Park Price Index and the Disney Effect.

I saw this line graph on my Twitter feed from the FRED data bank. It shows the change in the price index for "Amusement and Theme Parks" admission ticket prices.

They started at the beginning of 2006 with an index of 100.  As of May, 1 2016 the index was just a touch over 180.  This means that theme park ticket prices overall have increased by 80% in that time span.

My first thought when I saw this was what is the impact of Disney on the price of tickets.  I found this website which tracks their price changes.

I inserted RED bars (month and year on top) that show all of the Disney price increases (they had no price decreases) in this time period.

At the beginning of 2006 a single one day ticket to a Disney park was priced at $63.00 (see link above). Today a single day ("regular" price) is $110.00.  That is a 75% increase!

Remember, theme park (Six Flags et al) tickets increased by 80% overall.  Disney accounts for a disproportionate amount of that change.

If Disney admission tickets had just kept up with inflation during that time (using the CPI), ticket prices should only be $75.05, a 19.1% increase.

Seems clear that Disney is a "Price Maker" as opposed to a "Price Taker" and they are a "Price Leader" as well. However, the latter is harder to discern without doing the math.

When Disney raised prices did other theme parks follow suit at the same time?  If you look at the times in-between Disney price increases (gotta look really close) there seems to be a bump up in the line indicating a lag (sometimes short, sometimes longer) when other theme parks followed with price increases.

I did find it interesting that Disney elected to increase prices in the dead middle of the Great Recession (noted on graph in gray area).

Pricing power, indeed!
View My Stats