Chapters 3, 4, and 5 dealt with audiences for the arts and with the measurement and analysis of the economic demand those audiences generate in their role as arts consumers. The concept of supply was introduced in summary fashion in Chapter 4 to show how supply and demand interact in the market to yield the prices paid by consumers. We now take a closer look at the supply side. The technical process of production in the performing arts is examined in this chapter. In Chapter 7 we analyze the way in which the performing arts firm finds the optimum price-output combination by bringing together information on market demand and on its own production costs. Production and supply are organized very differently in the visual arts than in the performing arts and so are treated below in Chapter 9.

THE MEASUREMENT OF OUTPUT

In analyzing the economics of production, economists have conventionally chosen their examples from agriculture or manufacturing, probably because the measurement of output in those industries is relatively straightforward. A farm produces bushels of wheat or gallons of milk. A factory turns out yards of cloth, tons of steel, or cases of beer. In the service industries, including the arts, it is typically much harder to measure output. First, it may be difficult even to define satisfactory quantitative units. How do you measure the output of a bank or a police department or an art museum? Second, in the service industries a quality dimension may be important, and yet even harder to identify than quantity.