Supply and Demand The consumer market is driven by the Laws of Supply and Demand.
Excess supply typically results in lower prices. Excess demand leads to higher prices. One example of elastic commodities is the purchase of a vacation to a theme park. Although the vacation is a viable luxury, there are numerous factors that can affect the cost. The comparable price of close substitutes as well as the supplemental costs of complements to the vacation must be taken into consideration.
Various factors affect the supply and demand for goods and services.Some of the possibilities include changes in the economy and changes to consumers’ income. Creative marketing of goods and services takes a front seat for companies trying to sell their product or service in a tight economy. Seasonality can be a factor in the instance of theme park vacation sales. Winter packages are less expensive than summer planned theme park adventures. Vacations close to holidays are popular and therefor more pricey.
Many people are allotted vacation days from school and work around holidays so the number of potential buyers in the market is increased around these calendar days.One particular factor that weighs heavily on supply is natural disasters. If the area surrounding a theme park property is affected by hurricane, flood, or tornado, prices will drop to encourage tourism. As long as the opportunity costs of a vendor are covered, a profit can be made.
Dropping prices in stressful economic conditions encourages sales, however slight, and curtails business closures. In the case of natural disaster affecting a tourist attraction such as a theme park substitutes are instantly relied upon. Theme park vacations are an elastic commodity and substitutes are plentiful.A fishing or camping trip can prove to be a quality family vacation at a drastically lower cost. Planning a vacation around the exploration of museums closer to home is a viable substitute; as is a vacation to a nearby city, beach, or state park. Theme park vacations are expensive but given the long time horizon involved in planning such a trip, they are considered to be fairly elastic, therefor easily swapped with other potential goods and services.
In the planning of a theme park vacation, economic complements must be taken into consideration. Transportation and meals need to be factored into the budget.When gas prices escalate, consumers are much more likely to adjust to the situation by choosing substitute vacation options. Incessant web searching can sometimes reap rewarding deals on flights and smart car rentals.
Restaurants are constantly creating creative marketing maneuvers to lure vacationers to bring their dollars to the dining table. Coupons and discounts for children’s meals are enticing (and realistic) when a family is on a budgeted vacation. Online deals or package deals quench some of the harmonizing needs or complement costs. Theme park vacations are hyped by advertising.
They are not a necessity, although the need to entertain a family on vacation can often feel like one. Since these vacations are such a narrowly defined market, substitutes can easily be found. They are a luxury and maintain elasticity of demand because substitutes are ample (Mankiw, 2007). It is easy to employ the long time horizon of planning such a trip in an alternative course of action.
The elasticity of demand encourages companies that benefit from theme parks and tourism, in general, to adjust their prices according to the variables that influence sales.The change of consumer behavior related to expensive commodities is relevant to elasticity of demand. During a busy time of year for vacationing, theme park areas bustle with crowds. Taxi cab drivers maintain a standard rate for rides (Hamman, 2006). They will make more money in busier times, of course but their service is not a very inelastic demand. Visitors may choose to walk further before hailing a cab or take public transportation.
Cab rides are a luxury although complement vacations well. Inside of Disney World, photographers abound.They maintain a standard rate for taking the traditional photo that is almost as recognizable as Mickey Mouse’s ears. It is a luxury but the mindset that is partnered with “the great American dream vacation” can influence the emotional need for such a souvenir. In light of the recent economic conditions that the United States has experienced, it is helpful to recognize the elasticity of demand. Understanding the value of substitutes is much easier after struggling over a budget.
Luxuries are not necessities although the American consumer market can often mislead consumers into believing that the opposite is true.When the time horizon is maximized by proper planning by the consumer, goods and services can be purchased in a more elastic manner and the consumer gets a better deal. References Mankiw, N. G.
(2007). Principles of Economics (4th ed. ). Retrieved from The University of Phoenix eBook Collection database.
Hamman, K. (2006, June 29). Quirky alternatives to major theme parks. Smarter Travel. Retrieved from http://www. smartertravel.
com/travel-advice/quirky-alternatives-to-major-theme-parks. html? id=1265999
