ECONOMIC ANALYSIS FOR

MANAGERS ASSIGNMENT I

RONY P RAJAN
17MBA0050 VITBS
State your understanding of the case?
Case is all about the effect of GST on cinema theatre and entertainment outlets. In the

case it is clearly stated before the implementation of GST they had been used of paying two taxes

consisting subsidies contributing to the 50% of the price of the tickets. After the Implementation of

GST they realized that they had to pay 58% as tax of the ticket of each movie So, 1100 theatres went

on to strike against GST. From the past 10 years there had been no hike in the price of the tickets

There had been several confusion among the theatre owner committee one among them was ‘’local

body’’. One of other major reason is government not regulating the ticket sale.

Clearly spell out the microeconomic

concepts that you relate with the above
news clip?
Before GST , the tax was 0% for tamil named films so the revenue was high. For non-tamil movies tax

was 30% , so the revenue was less than other. After GST ,the tax was 58 % and 66.4% for tamil named

and non-tamil named respectively. So the basic concepts which we can relate this case to Revenue ,

Profit and cost for watching movie. Increase in the tax payment has reduced the margin of revenue

that theatre owners will get which in-turn reduced the profit of theatre owners. So as to compensate

the cost ticket price will get increased. This might affect the demand of ordinary movies.

Elaborate the concept in the context.

Movie industry demand driven industry. The supply is constant i.e. there will be movies coming and

going all the time. The profit that a producer gets from producing a movie is from distribution to

theatre and from satellite distributions. These are fixed costs. Theatre owners are supposed to give

this amount. The profit of theatre owners comes from the tickets they sell. They were getting huge

profits before GST coming into play. 0% tax for tamil named movies and 30 % for non tamil named
movies. After GST the government turned the tables. The tax was increased to 58 % for tamil named

movies and 66.4% for non tamil named movies. i.e. for example take the ticket price to be Rs.120.

Before GST

 120 Rs was the profit. Rs 60 each for theatre owner and distributer : for tamil named.
 84 Rs was the profit, Rs 32 each for theatre owner and distributer : for non tamil named.

After GST

 Rs 50 was profit,25 rs each for theatre owner and distributer : for tamil named.
 Rs 40 was profit ,20 rs each for theatre owner and distributer : for non-tamil named.

The main concepts involved in this case is Revenue ,cost and profits. As the tax increase ,profit of the

theatre owners decreased. The revenue of the owners decreased. If they didn’t went on strike the

owners might not be able to take movies in the future. Thus revenue and Cost have a negative

correlation. Price of the tickets must be based on the cost of production rather than on Taxes