Streaming Gets Cheaper
The question
Cinema tickets and home streaming subscriptions are substitutes for many households. The market for cinema tickets in the city of Halvern is initially in equilibrium when the largest streaming service permanently cuts its monthly subscription fee by half. Show the effect on the market for cinema tickets, assuming all else is held constant. Show the effect on the Supply and Demand graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Streaming Gets Cheaper: the worked answer
On the Supply and Demand graph, Demand shifts left.
Why Demand shifts left
The price of a related good is a determinant of demand, and streaming is a substitute for going to the cinema. When the substitute becomes much cheaper, some households watch at home instead, so fewer tickets are wanted at every ticket price and the demand for cinema tickets shifts left. Theaters' costs, technology, and number are unchanged, so the supply of cinema tickets does not move.
What happens to the equilibrium
The equilibrium price of cinema tickets falls and the equilibrium quantity of tickets sold decreases.
The mistake students make on this one
The usual wrong answer shifts the supply of tickets left because theaters end up selling fewer of them. That smaller quantity is a movement down along an unchanged supply curve, caused by the lower ticket price; nothing changed what it costs a theater to run a screening.
On exam day
For substitutes, demand in the market you are graphing moves in the same direction as the substitute's price, so a cheaper substitute pulls your demand curve left and a pricier one pulls it right.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Demand shifts left and every other curve on the Supply and Demand graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
More Supply and Demand scenarios
Last updated