Supply and Demand
Supply and Demand: Vacation to a theme park The supply and demand of goods and services vary due to various factors. This paper will discuss the supply and demand of vacation to a theme park and the various factors which affect them. First, there are many reasons why people wish to go on a vacation to a theme park. The many reasons include the fun and entertainment which can be experienced at the theme parks and also the family bonds that can be formed at the theme parks. Price is definitely a factor for people when making a decision to have a vacation at a theme park.
In line with the law of demand, when prices are high, people will be less able and willing to spend on a vacation to a theme park. On the other hand, when prices are low, people will be more able and willing to spend a vacation at a theme park. However, prices only affect the quantity demanded of the good. In terms of changes in demand of a vacation to a theme park, there are various factors which can influence it. One of the factors which affect demand will be expectations of the future.
When people expect economic health to deteriorate in the future, they will be more cautious about their spending for they fear consequences such as an increase in unemployment or decrease in income. As such, marginal propensity to save will increase, and thus people will be less willing and able to spend on a vacation to a theme park and this result in a fall in demand. On the other hand, if people expect economic growth in the future, they will be more willing to spend on a vacation to a theme park because they expect positive consequences such as an increase in income in the future.
In this case, demand for the vacation to a theme park will increase (“The Nature of Markets – Factors Influencing Demand and Supply”). Another factor which affects demand will be timing or seasonal changes. This is because most of the customers of theme parks are families, as such families can only visit theme parks during the holidays or when the whole family is free. As such, during periods such as school term, demand for vacations to a theme park will drop for people are unable to visit the theme park due to their other commitments such as work and school.
On the other hand, during holidays or school vacation, demand for vacation at the theme park will increase for people have the free time to visit the theme park (“The Nature of Markets – Factors Influencing Demand and Supply”). Lastly, the availability of substitutes and price of substitutes also affect demand of the product. When prices of substitutes decrease, consumers will opt for the substitutes in place of the vacation at the theme park. As such, demand will fall.
On the other hand, when prices of substitutes increase, demand for vacation at the theme park will increase for consumers will opt for the vacation at the theme park in place of the substitute. Two examples of substitutes for vacation at the theme park will include an overseas vacation or a vacation at a beach resort. In terms of supply, one of the factors involved will be cost of inputs. For example, when prices of metal are high, firms will be less able and willing to construct theme parks and this will reduce supply of theme parks. Another factor which can affect supply will be competition and prices of competitive goods.
If organizations feel that they will be unable to compete with fellow competitors in terms of prices and types of services such as rides, they will be less willing to build the theme park for they recognize the high risks and possible economic losses to be incurred. As such, supply will decrease (“The Nature of Markets – Factors Influencing Demand and Supply”). Vacation to a theme park can be complemented by various goods and services. One of which will be air tickets. For example, when prices of air tickets fall, demand for air tickets will increase.
In addition, people will be more attracted to flying to the theme park to spend a vacation there. Similarly, another complement good is hotels. When hotel rates fall, people are more able and willing to live in a hotel and thus will be able to afford to stay in the hotels in or near the theme park. Given that a vacation to a theme park is more of a luxury good and not a necessity, people will not spend their money on it unless they have extra disposable income or high purchasing power for they would rather use the money on basic necessities first. As such, demand for a vacation at a theme park is highly price elastic.
This means that when prices increase, demand for the product will decrease more than proportionately and the organization will experience a decline in profits. On the other hand, when prices decreases, demand for the product will increase more than proportionately and the organization will experience an increase in profits. As such, theme park organizations need to be very careful about their pricing strategies for they can result in drastic effects on total revenue and profits which the organization can earn. In conclusion, there are various factors which affect the supply and demand of acation to a theme park such as prices of substitutes, costs of inputs and time period. Like many products and services, a product like vacation to a theme park has many complements and substitutes. It is important that theme park companies understand these factors which affect supply and demand so that they can implement strategies which will maximize profits for the organization. References “The Nature of Markets – Factors Influencing Demand and Supply”. Retrieved January 14, 2010 from: http://www. bized. co. uk/educators/level2/markets/activity/markets16. htm