Question

The large movie studios in Hollywood are noticing that consumers are starting to prefer independent or smaller budget films such as Brokeback Mountain (hailed as a success at the box office) over larger budget films such as King Kong (an overall disappointment at the box office).

1. 1. First, using a market model, show the impact on the “Indies” market (independent films) if there is in fact an increase in tastes and preferences for them while at the same time film festivals such as Sundance are bringing more films to the market.  
2. 2. Secondly, show how this decrease in tastes and preferences for big budget films will impact the market for the typical Hollywood movies.  
3. 3. Lastly, based on your market models in parts (a) and (b), predict what you think will happen to movie ticket prices. Hint: Look at price (P) in both of your models.

Answer 1