Lecture 6 Firms and Markets in the Performing Arts – Nonprofits and For-Profits Professor Julia Lowell lowell@econ.ucsb.edu Spring 2012 4/ 18/ 2012 Econ 191ac -- Lecture 6 1
Outline: Lecture 6 • Go over HW5 (due today) • Key points from Lecture 5: Organizations in the nonprofit performing arts • Microeconomics of the live performing arts • Firms and markets in the performing arts – the commercial arts • Homework for Monday 4/ 23 4/ 18/ 2012 Econ 191ac -- Lecture 6 2
Tips on Data Collection (for Project Homeworks) • Always make sure your name is on your work, even if e- mailed. On Excel spreadsheets, put it on each sheet • Always give the date (year) associated with the data • Always reference data sources somewhere on page, even if they are the data sources I asked for, e.g., – Census Bureau, 2007 Economic Census – Bureau of Labor Statistics, Occupational Employment Statistics, May 2009 • Whenever possible, present data elements in the order they were given in the assignment (pop, 65+ , non-English, etc.) • Always check the class website for information on where to get data, how to get data, etc. 4/ 18/ 2012 Econ 191ac -- Lecture 6 3
Class Project Homework (HW4) for Monday 4/ 16 (1) First step tow ard class project – report on Excel sheet (1) Choose 5 U.S. metropolitan areas that had populations of 80,000 to 400,000 in 2010 Data: US Census Bureau, Census 2000, www.census.gov (try the ranking and comparisons tables) (2) For each metro area, report • Population • Percent of population 65 years and older • Percent speaking a language other than English at home • Percent that are college-educated (BA or higher) • Per capita money income • Percent of persons below poverty line Data: US Census Bureau, State and County Quick Facts (navigate from Census 2010 page) 4/ 16/ 2012 Econ 191ac -- Lecture 5 4
(HW4) for Monday 4/ 16 – The Cities You Chose (1) Econ 191ac SPRING 2012 Initial Cut at Cities: Class Project CITY STATE STUDENT STUDENT STUDENT STUDENT STUDENT Anchorage AK Bell Sawamura Huntsville AL Adler Tiow Montgomery AL Algert Flagstaff AZ Gilmartin Scottsdale AZ Uriarte Tempe AZ Bell Yuma AZ Tiow Anaheim CA Ayers Lembke Marenco Uriarte Berkeley CA Imru Chico-Paradise CA Algert Gilmartin Compton CA Hussein Huntington Beach CA Bell Irvine CA Ayers Uriarte Merced CA Gilmartin Kin Oceanside CA Ayers Oxnard CA Ayers 4/ 16/ 2012 Econ 191ac -- Lecture 5 5
(HW4) for Monday 4/ 16 – The Cities You Chose (2) Econ 191ac SPRING 2012 Initial Cut at Cities: Class Project CITY STATE STUDENT STUDENT STUDENT STUDENT STUDENT Redding CA Lembke San Mateo CA Marenco Santa Barbara (city/MSA) CA Benton Kin Marenco Ong Sawamura Santa Monica CA Hussein SLO-Atascadero-Paso Robles CA Algert Benton Gilmartin Sunnyvale CA Hussein Thousand Oaks CA Ayers Torrance CA Hussein Vallejo CA Hussein Boulder CO Marenco Bay County FL Ong Miami FL Uriarte Panama City FL Sawamura Tallahassee FL Lembke Columbus GA Adler Savannah GA Algert Bloomington-Normal IL Schaefer 4/ 16/ 2012 Econ 191ac -- Lecture 5 6
(HW4) for Monday 4/ 16 – The Cities You Chose (3) Econ 191ac SPRING 2012 Initial Cut at Cities: Class Project CITY STATE STUDENT STUDENT STUDENT STUDENT STUDENT Springfield IL Imru Topeka KS Adler Tiow Baton Rouge LA Ong Tiow Benton Harbor MI Benton Minneapolis-St. Paul MN Lembke Billings MT Algert Trenton NJ Ong Reno NV Adler Imru Kin Cincinnati OH Imru Eugene OR Bell Eugene-Springfield OR Schaefer Erie PA Kin Pittsburgh PA Imru Myrtle Beach SC Sawamura Sioux Falls SD Benton Lembke Abilene TX Schaefer Arlington TX Uriarte 4/ 16/ 2012 Econ 191ac -- Lecture 5 7
(HW4) for Monday 4/ 16 – The Cities You Chose (4) Econ 191ac SPRING 2012 Initial Cut at Cities: Class Project CITY STATE STUDENT STUDENT STUDENT STUDENT STUDENT Brownsville-Harlingen-San Benito TX Schaefer Bryan City TX Tiow Bryan-College Station TX Kin Waco TX Adler Benton Salt Lake City UT Marenco Burlington VT Schaefer Grant (county) WA Yang Skagit (county) WA Yang Thurston (county) WA Yang Vancouver WA Bell Whatcom (county) WA Yang Yakima (county) WA Yang Green Bay WI Gilmartin Ong Cheyenne WY Sawamura 4/ 16/ 2012 Econ 191ac -- Lecture 5 8
Class Project Homework for Wednesday, 4/ 18 • Get data for each of your cities (or metro areas) – number of establishments (by tax status if available) – receipts/ revenue – number of employees • For – architectural services – historical sites – theater companies – graphic design establishments – sound recording studios I f the data don’t exist at the city level, try the m etro level. I f not at the m etro level, just report that data w eren’t found. Source: U.S. Census Bureau, Economic Survey 2007, Industry Surveys by Geographic Area 4/ 16/ 2012 Econ 191ac -- Lecture 5 9
FROM LECTURE 5 COSTS OF LI VE PERFORMI NG ARTS FI RMS 4/ 18/ 2012 Econ 191ac -- Lecture 6 10
Why Do Nonprofits Get So Many Tax Breaks? • Provide a public benefit • Encourage citizens to become engaged • Provide high quality product or service • Can’t operate without subsidy Consum ers’ total w illingness to pay doesn’t cover fixed costs 4/ 18/ 2012 Econ 191ac -- Lecture 6 11
Fixed vs Variable vs Sunk Costs • Fixed costs – Do not vary with the quantity of output produced • Variable costs – Vary with the quantity of output produced • Sunk costs – Cannot be recovered or reversed if the activity is ceased 4/ 18/ 2012 Econ 191ac -- Lecture 6 12
Fixed vs Variable Costs of Staging a Musical or an Opera (2) Depends on the unit of output – venue rental or mortgage Units of output payment • tickets (seats) sold – rehearsal time – scenery, props, costumes • tickets (seats) available (for theatre & opera) for sale – salaries of managers, • performance actors, singers, musicians • production – wages of stagehands & technical crew – wages of ushers and ticket-takers – wages of back-office personnel – advertising & publicity 4/ 18/ 2012 Econ 191ac -- Lecture 6 13
Fixed vs Variable Costs of Staging a Play or an Opera • Variable costs per production; fixed costs per performance – venue rental or mortgage payment (?) – rehearsal time – scenery, props, costumes – wages of back-office personnel (?) – advertising & publicity • Variable costs per performance – salaries of managers (?) – salaries of actors (?) – wages of stagehands, technical crew, ushers, etc. 4/ 18/ 2012 Econ 191ac -- Lecture 6 14
MI CROECONOMI CS OF FI RMS ( ORGANI ZATI ONS) I N THE LI VE PERFORMI NG ARTS 4/ 18/ 2012 Econ 191ac -- Lecture 6 15
Microeconomics of the Live Performing Arts Firm (1) Let • Unit revenue be measured by price/ ticket • Unit cost be associated with cost/ seat in open-ended run Then • What shape is the demand curve? Marginal revenue curve? • What shape is the marginal cost curve? Average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 16
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? • What shape is marginal revenue curve? • What shape is marginal cost curve? • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 17
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? – Demand curve is downward sloping • What shape is marginal revenue curve? • What shape is marginal cost curve? • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 18
Demand Curve Is Downward-Sloping price and cost per seat D Available seats over length of run 4/ 18/ 2012 Econ 191ac -- Lecture 6 19
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? – Demand curve is downward sloping • What shape is marginal revenue curve? • What shape is marginal cost curve? • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 20
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? – Demand curve is downward sloping • What shape is marginal revenue curve? – Marginal revenue curve is downward- sloping • What shape is marginal cost curve? • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 21
Demand and Marginal Revenue Curves Are Downward-Sloping price and cost per seat D MR Available seats over length of run 4/ 18/ 2012 Econ 191ac -- Lecture 6 22
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? – Demand curve is downward sloping • What shape is marginal revenue curve? – Marginal revenue curve is downward- sloping • What shape is marginal cost curve? • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 23
Microeconomics of the Live Performing Arts Firm (2) • What shape is demand curve? – Demand curve is downward sloping • What shape is marginal revenue curve? – Marginal revenue curve is downward- sloping • What shape is marginal cost curve? – Marginal cost curve is almost flat • What shape is average cost curve? 4/ 18/ 2012 Econ 191ac -- Lecture 6 24
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