Spain’s Fiesta del Cine and price elasticity of demand

People have been forming long queues outside cinemas throughout Spain this week, attracted by the €2.90 ticket price of this year’s Fiesta del Cine. A record million people have signed up for the three-day event, which was launched five years ago by the Culture Ministry and the country’s distributors and producers in response to the global depression that has hit Spain particularly hard—unemployment stands at 27 percent.

The film fest, which ends this Wednesday, is becoming an unqualified success. According to media research company Rentrak, some 335,000 people visited the more-than 300 cinemas nationwide taking part in the event on Monday, a 550% increase on the previous week, with a 330% hike in box office takings.

So what are we to make of these spectacular results at a time when cinema attendance continues to fall? How is it possible that so many people are prepared to queue up to see a movie in a cinema when they could easily download many of them illegally from the internet for free? The answer is simple, and is something that university students learn in Economics 101: price elasticity of demand, which measures the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.