Economics A-Level help!

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meli77
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#1
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#1
Hey guys!

I need help with a 5-marker.

The extract:
West End ticket prices reach all time high
The price of West End theatre tickets in London has reached an all-time high. In the past
year alone, up to January 2013, the average top-price ticket has risen by almost £10 and
now stands at £81.05. In January 2013, London theatres announced record numbers of
people wanting to buy tickets for shows. Costs of running the theatres have also risen
because there are restoration costs to pay and energy costs have increased. This rise in 5 costs is despite some of the theatres in the West End receiving subsidies.

The question:
Explain why the price of ‘the average top-price ticket has risen by almost £10’ (Extract A, line 2). Use a supply and demand diagram in your answer.

My answer:
One reason why ticket prices have gone up is due to the increase in "cost of running the theatres." (demand and supply diagram where supply shifts to the right with a new equilibrium) This is because theatres need to make profit in order to keep their businesses running.

Would this get 5/5? If not then why?
Thanks!
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username5960917
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#2
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#2
This would get 0 or 1 marks at most.

The whole thing is almost completely wrong. Prices have increased due to demand shifting up. That's true. The new price is not because of "needing to maintain profitability". What on the diagram talks about profit? This isn't a market diagram.

You should talk about rationing. In the short-run, prices are sticky and excess demand is rationed off by a new higher price at the new equilibrium value.
^^ that is a high level answer which would get you 5/5 marks.

Also, you shouldn't be talking about costs. Again, they're asking for a demand and supply diagram. Talk about cost is superfluous. Only talk about rising demand.
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meli77
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#3
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#3
oops that's embrassing
One reason why ticket prices have gone up is due to “record numbers of people wanting to buy tickets for 
shows” (demand shifting to the right diagram) In the short-run, prices are sticky and excess demand is rationed off by a new higher price at the new equilibrium value.

what about this?
Last edited by meli77; 4 weeks ago
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username5960917
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#4
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#4
Yeah maybe 3 or 4. You need to show the rationing effect on the diagram and explain whats happening
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meli77
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#5
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#5
(Original post by wiseowlz72)
Yeah maybe 3 or 4. You need to show the rationing effect on the diagram and explain whats happening
can you please explain how i can do that?
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username5960917
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(Original post by meli77)
can you please explain how i can do that?
Yeah one moment. I'll post a diagram within the hour
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username5960917
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(Original post by wiseowlz72)
Yeah one moment. I'll post a diagram within the hour
Here:
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username5960917
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#8
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Demand shifts from D to D'. Prices are sticky in the short-run (this is a Keynesian assumption), and so the equilibrium price of p1 remains and at the new demand curve D' the quantity q2 will be demanded. However, this demand outstrips the quantity firms are willing to supply at p1 (which is q1). (I made a mistake in the diagram, the actual XS supply is between q1 and q2).

Therefore, what will happen is the market will ration the excess demand and prices will adjust to the new equilibrium price at P*2 (P-two-star), and the demand is rationed to new equilibrium quantity demanded q*2 (q-two-star) at this new price. This new equilibrium is one of which buyers are happy to pay the new price and suppliers are happy to supply at this price.
Last edited by username5960917; 4 weeks ago
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meli77
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#9
(Original post by wiseowlz72)
Here:
Great thank you so much!!
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username5960917
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#10
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#10
(Original post by meli77)
Great thank you so much!!
I amended the graph here:
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meli77
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#11
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#11
(Original post by wiseowlz72)
Demand shifts from D to D'. Prices are sticky in the short-run (this is a Keynesian assumption), and so the equilibrium price of p1 remains and at the new demand curve D' the quantity q2 will be demanded. However, this demand outstrips the quantity firms are willing to supply at p1 (which is q1). (I made a mistake in the diagram, the actual XS supply is between q1 and q2).

Therefore, what will happen is the market will ration the excess demand and prices will adjust to the new equilibrium price at P*2 (P-two-star), and the demand is rationed to new equilibrium quantity demanded q*2 (q-two-star).
Wowww this is very high level thankssss
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username5960917
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#12
(Original post by meli77)
Wowww this is very high level thankssss
No problem! I'm sure this will impress any examiner. I don't remember exactly when they teach this, as in, I don't remember if it's AS or A2. Either way, you have it now.
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meli77
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#13
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#13
(Original post by wiseowlz72)
No problem! I'm sure this will impress any examiner. I don't remember exactly when they teach this, as in, I don't remember if it's AS or A2. Either way, you have it now.
Hey! Would you mind marking this for me please?
Your help is appreciated!

Extract:
Cineworld merger with Cinema City International (CCI)
The UK’s biggest cinema chain by market share is to enter seven overseas markets
through a £900m merger. Cineworld announced that it has agreed to merge with CCI
which owns 100 multiplex cinemas in seven countries Bulgaria, Czech Republic, Hungary, Israel, Poland, Romania and Slovakia. The deal is expected to be promoted as a merger of equals although Cineworld is larger than its new partner. The planned merger with CCI 5 follows a fall of 1% in the revenue earned by cinemas in the UK and Ireland in 2013 to £1.17bn.
In 2013, Cineworld was ordered by competition regulators to sell three cinemas following
its takeover of the Picturehouse chain. This underlined the difficulty of finding new
growth opportunities in the company’s home market, which was one factor prompting a 10 search for international expansion opportunities.
Cineworld’s UK-based rivals have also grown overseas, with Odeon UCI having a presence in seven countries, while Canadian-owned Vue Entertainment has cinemas in Portugal, Taiwan, Germany and Denmark.
The combined group is to be run by CCI’s chief executive, although other senior 15 management will be drawn from the ranks of both companies and the board will have
more Cineworld board members.

Examine two reasons why Cineworld plans to merge with CCI.

A merger is when two companies join together under common ownership.

It can grow into new markets. Through merging with, they can benefit from the “cinemas in seven countries” as they can operate within these countries. This in turn means that Cineworld will benefit from information synergy as well as the CCI’s large consumer base hence an increase in their amount of customers. Consequently, this would result into higher revenues and profits in the long-run.
Cineworld was ordered by competition regulators to “offload three cinemas following its takeover of the Picturehouse chain.” Subsequently, this justifies why Cineworld would like to merge as they are having difficulties of finding new growth opportunities in the company's home market and through merging they can acquire more market power and hence benefit from economies of scale.
However, one reason they may not merge is due to the magnitude of fall in cinema sales which is “1%”. This could suggest that they are just having a bad year and hence would not risk merging and consequently be scrutinised by competition market authorities.
Cineworld merger with Cinema City International (CCI)
The UK’s biggest cinema chain by market share is to enter seven overseas markets
through a £900m merger. Cineworld announced that it has agreed to merge with CCI
which owns 100 multiplex cinemas in seven countries Bulgaria, Czech Republic, Hungary, Israel, Poland, Romania and Slovakia. The deal is expected to be promoted as a merger of equals although Cineworld is larger than its new partner. The planned merger with CCI 5 follows a fall of 1% in the revenue earned by cinemas in the UK and Ireland in 2013 to £1.17bn.
In 2013, Cineworld was ordered by competition regulators to sell three cinemas following
its takeover of the Picturehouse chain. This underlined the difficulty of finding new
growth opportunities in the company’s home market, which was one factor prompting a 10 search for international expansion opportunities.
Cineworld’s UK-based rivals have also grown overseas, with Odeon UCI having a presence in seven countries, while Canadian-owned Vue Entertainment has cinemas in Portugal, Taiwan, Germany and Denmark.
The combined group is to be run by CCI’s chief executive, although other senior 15 management will be drawn from the ranks of both companies and the board will have
more Cineworld board members.

Many many thanks!
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