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We have all been excited to see that new summer blockbuster that has just come out in the movie theaters. Getting all our friends and family to go can be a fun way to spend the afternoon. Although none of us love paying what seems to be way over priced refreshments. I am sure we have all cursed under our breath as we pay for our beloved popcorn and a medium drink, or just kept on walking. So, why do movie theaters charge so much for refreshments? How can they get away with it? As I investigated this well-known economic truth, I found out that there are many variables that come into play. First, it could be the simple explanation of market power. Where demand and supply determines the price. Second, a closer look shows that it seems like a monopoly situation. Third and finally, brings up the hypothetical situation of the natural monopoly. To begin, when I first examined this problem I initially thought it was a simple example of how demand and supply determines the price. This would explain the reason for the high prices. The demand is a lot higher then the supply. As I have demonstrated in the following graphs. In Graph A I have shown an example of what the demand for refreshments (softdrinks, bottled water, popcorn, candy etc.) in an outside market, or outside of a movie theater.
Approximate Word count = 931
Approximate Pages = 3.7
(250 words per page double spaced)
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