During this project I am going to find out if Thorpe Park tickets are price and income elastic to help me do this I will be visiting Thorpe Park.If a product is price elastic it means that it is responsive to a change in price.
So that a small change in price will lead to a bigger change in quantity demanded whereas if a product were inelastic a small change in price would lead to a smaller change in quantity demanded. It is measured by this equation:% Change in Quantity Demanded% Change in PriceThis can be shortened to be: Price x Change in Quantity DemandedQuantity Demanded x Change in PriceFor elasticity in general if the result of this equation is between minus one and one it means that the product is inelastic but if the result is greater than one or minus one it is elastic.The Relevant factors, which affect P.E.D for Thorpe Park tickets are:1. The number of substitutes2.
The proportion of income on a commodityPrice Elasticity Hypothesis:I believe that the price of Thorpe Park tickets is inelastic because:There are little or no substitutes for Thorpe Park. The nearest theme park is Chessington World of Adventures, which is at least 50 miles away. This means that if there was a change in the price of the tickets the customer would have no cheaper alternative to turn to. Therefore they would carry on buying the service Thorpe Park provides.
However the more general you define the industry the more elastic it would become e.g. a swimming pool or a zoo etc. Thus making a lot of substitutes to Thorpe Park.
The second reason is the proportion of income spent on the commodity. There is a relatively low proportion of someone's income spent on a ticket for Thorpe Park. Therefore if the price were to rise by 10% out of a �20 ticket it would only mean a �2 rise. However if there was a 10% rise on a house or a car it could mean a �5000 or a �500 rise on the product which is a big part of a person's income.
This could mean that the person would not buy the house/car but they would still buy the ticket. This would make the price inelastic for Thorpe Park tickets.If a product is income elastic it means that it is responsive to a change in income. This means if there is a change in income the change in demand will be of a similar proportion; if there is a small change in income there will be a smaller change in demand than if there is a larger change in income.
If a product is income inelastic it means that no matter how big the change in income there will be no change in demand, or very little change.Equation:% Change in Quantity Demanded% Change in IncomeThis can be shortened to be: Income x Change in Quantity DemandedQuantity Demanded x Change in IncomeIncome Elasticity Hypothesis:My hypothesis is that the tickets for Thorpe Park are income elastic as it is a 'luxury' day out. Therefore people who do not have very much money cannot afford to spend that amount of money to go to a theme park. But if the average income raises people will want to do different things for entertainment as they have more money to pay for this.
This is why I believe tickets for Thorpe Park are income elastic as they might believe that the park is not high quality as the price is lowMETHODOLOGYRoutes of enquiry1. Search on the net - find out prices of tickets for Thorpe Park and other parks because to find out elasticity we need the starting point of knowing the price2. Text books - I will use these to make sure I have a full understanding of elasticity3. Class notes from book - I have been given the empirical (real life figures to find out theory) data of price elasticity demand values for a variety of products.
If these products are closely related to Thorpe Park it should give me additional insight into a P.E.D value for Thorpe Park4. Questionnaire to family and friends - I am choosing a sample size of ten people and I will ask them questions to find out their attitudes to price and income changingThese are my questions:i. How many visits (on average) do you make to Thorpe Park in a yearii. If your income were to rise by 50% how many visits would you makeiii.
If your income were to rise by 100% how many visits would you makeThe price of admission for an adult to Thorpe Park is in the region of �20iv. If the price of the ticket were to rise to �30 per ticket how many visits would you makev. If the price of a ticket lowered to �10 per ticket how many visits would you makeAll of these had the same 7 multiple choice answers:a) Neverb) 1-2c) 3-4d) 5-6e) 7-8f) 9-10g) 10+5. Visiting Thorpe Park - To speak to Steve Messenbird, the admissions manager at Thorpe Park for more understanding of figures relating to admissions and other topics.RESULTSResults from the Internet:Adult TicketsSummer PeakPeakOff-PeakThorpe Park�23.
00�21.00�17.00Chessington World of Adventures�23.00�21.00�17.
00Alton Towers�25.00�23.50�18.50Results from Class Notes:In 1997 empirical evidence carried out by Ian Marcouse found the values of P.E.
D for the following products:Cigarettes = 0.5Fulham Child Ticket = 2VW Beetle = 0.1Results from Questionnaire: The "a, b, c, d, e, f and g" refer to the question answers as shown in the methodology.Results from my Visit to Thorpe Park:Advertising: Thorpe Park advertises on the Internet, T.
V in the south, and radio in the London area. They also advertise in newspapers such as The Sun with coupons for buy "one get one free" and "kids go free" and through the restaurants in the park such as Burger King and KFC. The local residents get discounts and free tickets and they also get employment to repay for any disturbance or disadvantage caused by the park.Costs of Advertising: �3,250,000Prices and Admissions:YearPrice (p)Visitor Numbers (q)2000�17.50700,0002001�191,200,0002002�211,700,000 (estimated)ANALYSIS OF RESULTSInternet: These results are not useful to me, as they do not give me enough figures to work out the P.E.
D or I.E.D. To work out the figures I would need to have the yearly visitor numbers or percentage change in visitor numbers and the previous year's prices or percentage change in price.Class notes: Cigarettes are consumables. They take up a very small part of someone's income therefore they are inelastic.
However this information is not helpful to compare with the tickets for Thorpe Park, as they are addictive. As they are addictive the consumer will do their best to maintain their consumption and will only stop if the price was something ridiculous for example �100 per packet.The price of a Fulham child ticket is elastic because there are a lot of substitutes for it. There are different teams and sports that can be watched which will cost less so if the price for this gets too high the consumer will buy another good/service.
This information though is not useful to me, as it is a child's ticket. This means it will usually be accompanying an adult therefore this does not the full cost of the entrance to the game.The price of a car is inelastic because a car is a necessity. This means that no matter how the price changes people still need cars so they will try to buy them. However a particular brand of car such as a V.W.
car is elastic as there are so many different substitutes to choose from. For some V.W. cars such as a Beetle or a Camper Van they have become collectables. This will cause them to become inelastic as a substitute will not do for a collectable. This information is no use to me as a car is a consumer durable and a Thorpe Park ticket is a consumable therefore they cannot be compared.
Results from Questionnaire: We can work the income and price elasticity from the questionnaire as the questions were designed to get this information.Price elasticity:Original p x change in q % change in Q.D.Original q x change in p % change in P or incomeThe original price was �20 and the change in this was �10.
The original quantity was 1.5 and the change in quantity was 0 therefore the formula is20 x 0_1.5 x 10This equals 0 therefore it is perfectly inelastic.When there was a �10 taken away from the ticket the equation was20 x 1_1.
5 x -10This equals -1.33 therefore making it very elasticIncome elasticity:The base amount of income is 100% and the change is +50%. The base amount of quantity is 1.5 and the change is 1 making the percentage change 167%16750This equals 3.34. Because it is positive it means the product is a normal good.
The result is also more than 1 therefore the product is also a luxury good.233100This equals 2.33. This means that, as above, the tickets for Thorpe Park are a normal, luxury good.Thorpe Park: Between the years 2000 and 2001 the elasticity equals17.50 x 500,000700,000 x 1.
50This equals 18.75.Between the years 2001 and 2002 the elasticity equals19 x 500,000_1,200,000 x 2This equals 15.83.These answers must be invalid as the relationship between price and quantity demanded is inverse so the answer should be negative and we take it as everything else fixed. Because we got the answer that we did it means that everything else is not fixed and my other results show this as they advertise on T.
V and radio, give out free tickets, upgrade rides and build more rides.CONCLUSIONFrom collecting my data I have discovered some of my results to be invalid and the reasons for this are stated above. The results that were valid were my results from my questionnaire. These results completely contradicted each other.
The first was for an increase in price and this showed that the Thorpe park tickets were perfectly inelastic making it a necessary good as the result was zero. The second was for a decrease in price and the result of this was -1.33 making it very elastic and a luxury good. I believe that my result for inelasticity however is not correct as it is not necessary for a person to make a visit to Thorpe Park. There are many alternatives and as it is an entertaining service there are many goods that provide entertainment.Both my income elasticity results showed that Thorpe Park tickets are very elastic goods.
They also show that they are luxury goods. This backs up my hypothesis that Thorpe Park is a luxury good and the more income a person has the more likely they will make a visit to Thorpe Park.I believe that the results from Thorpe Park's data are incorrect due to the fact that the calculation of elasticity assumes everything else is fixed. However in this situation everything else wasn't fixed as the visitor numbers showed.
It is logical that as the price rises for a product that demand would fall. However as the price was rising so was the amount of visitors; this meant there was another factor affecting equation. After collecting results from Thorpe Park I discovered that the factors affecting the equation were advertising and the amount of rides in the park. Over the period that prices and demand was rising so had the amount of attractions in the park and the amount of money spent on advertising the park. This would mean that more visitors would come to the park to enjoy the new rides.From the results I have collected I still believe that tickets for Thorpe Park are price elastic but to be confident about this I would need to collect more data.
EVALUATIONMy coursework was limited by many things. The amount of data I collected is one of these factors. If for my questionnaire I had asked 50 people instead of 10 my results may have been more accurate and proved to give a more definite answer. If I had taken into account other theme parks and similar attractions and compared the visitor numbers to national average income I could have calculated the income elasticity for that type of attraction in general. If I had given my questionnaire to those who live near Thorpe Park I may have received a more accurate answer as they are likely to visit the Park more often.
I would have liked to be able to calculate the price elasticity when everything else is not fixed then I would be able to get an accurate valid answer for the income elasticity of Thorpe Park tickets.I would also have liked to collected information for advertising elasticity as that would have enabled me to see how this affected people's decisions to go. I would have done this by calculating the percentage change in quantity demanded over the percentage change in advertising.
