Classroom C-4

Economics Of:

Sunk Costs – Renting out a Theatre

When a show rents a theatre to perform in, they sign a contract and those costs cannot be recovered

Shift In DemandIn 2014, the show Gentleman's Guide to Love and Murder won the Tony Award for Best Musical. Ticket prices skyrocketed because everyone wanted to go see that years best musical

Quantity SuppliedThere are currently 33 Broadway shows out that one can go see

Dead Weight Loss – Empty Seats during a performance

InelasticAs of May 27th 2015, Book of Mormon tickets are priced from $90 to $299 per ticket

As of May 27th 2015, Wicked tickets are priced from $92 to $212 per ticket

These shows are more price inelastic because they have both won Tony awards for best musical and are the “hot ticket” shows currently playing in Manhattan. People are more willing to pay any price to see these shows

ElasticNewer shows that have yet to become completely established are more elastic.

It Shoulda Been You opened on March 17th 2015 and tickets are priced from $69 to $142

Gigi opened on March 19th 2015 and tickets are priced from $67 to $147

People are not as willing to pay large amounts to see these shows

Fixed/ Variable/ Total CostsFixed Cost: Renting the space to perform your

show

Variable Cost: A show lessening the amount they pay actors in the ensemble (smaller parts)

Total Cost: Full Production Costs

Examples: Book of Mormon: According to the NY times the Total Cost was 11.4 millionWicked: According to the NY times the Total Cost was $14 millionPippin: According to the NY times, the Total Cost was $8.5 million

Opportunity CostIf someone takes a trip to Manhattan with only one night to see a Broadway show and they choose to see Hairspray over Kinky Boots, their opportunity cost would be not seeing Kinky Boots during their time in the city.

Shutdown Point A Show closes on Broadway when it begins losing money. As attendance declines, they can send blocks of tickets to the half-price TKTS booth in Times Square, but eventually, without a little boost from winning a Tony or two or re-casting the show with a new interest lags and it's becomes time to put together the National Tour.