Manon's Econ Blog

Oprah on sale!

Posted on: November 16, 2009

The Broadway Theatre

 

Oprah Winfrey is an American media personality, actress, television producer, literary critic and magazine publisher. Well known throughout America and the whole world, people would pay enormous amount of money to see her on her show. This can be seen on the diagram below.

OprahEP1 on the diagram was the equilibrium point before Oprah became famous. After advertising, shows and so on, the equilibrium point shifted to EP2. The quantity stays unchanged because there is only one Oprah, so the supply curve is perfectly inelastic; but now people are willing and able to pay an higher price to see her. Since the demand curve is really elastic (taste changes very fast and people who want to see her are willing and able to pay a very high price), a small change in quantity demanded will lead to a huge change in price.

 

On the reverse, as her celebrity will decline, demand curve will shift again but to the left, as shown on the diagram below.

Oprah 2On this diagram we can see the exact opposite of what happened before. Demand curve shifted to the left because less people are willing and able to pay a high price to see Oprah. As before, since the demand curve is really elastic, a small change in quantity demanded will lead to a huge change in price.

Looking at these two diagrams, we can conclude that Oprah should aim to increase her popularity (or at least to keep it up) because if it drops, demand will shift, and her revenue will drastically fall.

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