Challenging students to grapple with real-life questions can help them to grasp abstract concepts, notes Cornell business school professor Robert H. Frank. That’s why Frank asks his pupils to “pose an interesting question based on something they have observed or experienced—and then employ basic economic principles in an attempt to answer it.” Case in point: Frank’s student Peter Hlawitschka asked, Why do tickets for popular Broadway shows command premium prices, while movie theaters charge the same price no matter how hot the show is?
Hlawitschka’s explanation, as shared by Frank in a New York Times article, is that unlike on Broadway, additional copies of a popular movie can be inexpensively made and shown many times a day on multiple screens. With low prices, movie theater owners can fill many more seats and generate far more revenue than if they charged premium prices for a more limited number of screenings.
