Question

Many movie theaters charge a lower admission price for the first show on weekday afternoons than they do for a weeknight or weekend show. Explain why.

Short answer

The variation in admission prices between the first show on weekday afternoons and weeknight or weekend shows is mainly due to different factors such as principles of supply and demand, cost of operation, the target audience and the competition. During the weekday afternoons, the demand is lower, operational costs are less, and the target audience is the group who may be more price sensitive. Therefore, theaters lower their prices at this time to attract more attendees.

Step-by-step solution

Understand the principles of Demand and Supply

The principle of supply and demand is key here. According to this principle, prices for goods or services are set based on their demand and supply. If a product or service has high demand and low supply, its price will be high. Conversely, if a product or service has high supply and low demand, its price will be low.

Analyze the Cost of Operation

Movie theaters also have to consider the cost of operation as part of their pricing strategy. This includes costs such as electricity for the projectors, wages for the employees, and more. Shows during the afternoon will typically have less employees working and thus, lower operating costs. In addition, during the weekday afternoons, electricity demand and costs are generally lower as compared to night or weekends. Therefore, operational costs are lower during the weekday afternoons.

Consider the Target Audience

The target audience during weekday afternoons are different from weeknights or weekends. During the weekdays, the target audience would mainly be adults who do not work on regular hours, senior citizens or students who may be on a budget; whereas, in the weeknight or weekends, the target audience is broader, including working adults or families who can afford a higher price. Thus, the theaters set lower prices during the weekday afternoons to increase attendance among these groups.

Analyze the Competition

Competition with other theaters or even streaming services can also influence pricing. By offering lower prices for weekday afternoon shows, theaters can differentiate themselves and attract more consumers who are price-sensitive at this time.