The following article (http://www.businessinsider.com/disney-demonstrates-defini

Question

The following article (http://www.businessinsider.com/disney-demonstrates-definition-pricing-power-2015-11 ) depicts some pricing and attendance information at the Magic Kingdom at Walt Disney World in Orlando, Florida. Examine the article and its graphs to address the following questions:

a. What can one conclude about the price elasticity of the Magic Kingdom? Is it likely price elastic or price inelastic? Explain the rationale for your response.

b. Define the term “pricing power” and articulate how Disney is using its pricing power to its benefit.

c. Does the graph over the 2008 to 2014 period infer that there were other factors, such as the economy and not necessarily price, which were driving attendance figures at the Magic Kingdom? Explain.

Explanation / Answer

a) Demand is price elastic when proportion change in price causes more than proportional change in quantity demand and when less than proportional change in quantity demand occurs it is inelastic.

As w e can see that in the article it is present and on the chart it is shown that despite increasing price the demand did not fall. Hence the demand could be said to be inelastic.

b) Pricing power refers to the effect of change in product's price on quantity demanded. the data presented in the article shows high pricing power of the Disney beacuse despite substantially increasing the price over years the number of attendees are growing rather than falling down. The company is using and enjoying its pricing power by being innovative everytime to enrich the experience of attendees so that their recreational experience does not become boring ike that of resort or restraunt. Henceiwth this point the company is increasing price, attending more customers and enjoying great margin of profit year by year.

c) Iin 2008 the worldwide recession hit all the econmies and especially America. To which the attendees were lesser in the early years till 2010 but when the world econmies start rejuvenating the spending of consumers stimulated. This also had effect on recreational activites and beacsue of which more people now after 2010 start thinking to spend more on these activities leading to rise in attendees of Disney.

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