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Sports Economics
| Term | Definition |
|---|---|
| Demand | The quantity of a product that consumers are willing and able to purchase at a given price over a given time period. |
| Law of Demand | states that as price rises, the quantity demanded will fall |
| Normal Goods | a rise in incomes will lead to an increase in demand |
| Inferior Goods | a rise in incomes leads to a fall in demand |
| Substitute Good | a rise in the price of a ....... will lead to an increase in demand |
| Complementary Good | a rise in the price of a .......... will lead to a decrease in demand |
| Consumer Preferences | sometimes, less tangible changes in tastes and fashion can cause demand to either increase or decrease |
| Supply | The quantity of a product that producers are willing and able to provide at a given market price over a given time period |
| Production costs and technology | A fall in production costs, or improvement in technology, will incentivize an increase in supply |
| Taxes and Subsidies | A tax will increase costs of production, causing a decrease in supply, while a subsidy will decrease costs of production, causing an increase in supply. |
| Price of other goods | An increase in the price of a good in competitive supply will lead to a decrease in supply, while an increase in the price of a good in joint supply will lead to a increase in supply |
| Competitive Demand | is when goods are substitutes for one another |
| Joint Demand | is when goods are complementary and therefore demanded together |
| Derived Demand | is when the demand is not for the good itself, but what it produces |
| Composite Demand | is when a good is demanded for multiple uses |
| Joint Supply | is where a firm produces more than one product together |
| Competitive Supply | is when a firm can use its factors of production to produce alternative goods |
| Price Elasticity of Demand | measures the responsiveness of quantity demanded to changes in price |
| Price Inelastic Demand | quantity demanded is relatively unresponsive to changes in price |
| Price Elastic Demand | quantity demanded is relatively responsive to changes in demand |
| Unitary Demand | changes in quantity demanded are proportional to price changes |
| Availability and closeness of substitutes | the more close substitutes there are, the more price elastic the product is likely to be |
| Extent to which the product is addictive or a necessity | the more of a necessity a product is, the more likely it is to be price inelastic |
| The relative expense of the product with respect to income | the higher the proportion of income the purchase takes, the more likely it is to be price elastic |
| Time | the longer the time period that consumers have to adjust to a price change the more price elastic a product will be |
| Total Revenue | is all of the income earned by a business, calculated by price x quantity sold |
| If Price Elasticity of Demand is inelastic | an increase in price will help to maximize revenue |
| If Price Elasticity of Demand is elastic | a decrease in price will help to maximize revenue |
| Price Elasticity of Supply | measures the responsiveness of quantity supplied of a product to changes in price |
| Price Elastic Supply | quantity supplied is relatively responsive to changes in price |
| Price Inelastic Supply | quantity supplied is relatively unresponsive to changes in price |
| Unitary Supply | changes to quantity supplied are proportional to changes in price |
| Time period and production speed | the longer the time it takes for supply to be adjusted, the more price inelastic supply will be |
| Availability and mobility of factors of production | the more available spare labor and capital a firm has to call on to increase output, the more price elastic supply will be |
| Availability of Stocks of Product | the more stocks a firm has ready to be released if an increase in demand leads to a price rise, the more price elastic supply will be |
| Luxury Goods | change in demand greater in proportion to change in income (income elastic) |
| Necessity Goods | change in demand smaller in proportion to change in income (income inelastic) |
| Business Uses of Income Elasticity of Demand | figures can help businesses to plan and estimate likely future demand based on incomes and the situation in the economy |
| Business Uses of Cross Elasticity of Demand | figures can help businesses to estimate changes in demand for their products and consider strategies in response to other business decisions |
| Market Failure | is when the price mechanism fails to achieve an efficient allocation of resources |
| Private costs and Benefits | are those incurred by an individual or firm involved in an economic transaction |
| External costs and Benefits | are those incurred by third parties not involved in an economic transaction |
| Negative Externalities | are adverse consequences that are imposed on third parties as a result of an economic transaction (e.g. alcohol consumption and pollution) |
| Positive Externalities | are beneficial consequences that are gained by third parties as a result of an economic transaction (e.g. beekeeping and Christmas lights) |
| Government Failure | occurs where an intervention introduces more distortions than it overcomes |
| Merit Goods | goods which include substantial social benefits. A ..... is one which the government feels that people will under consume and which therefore ought to be provided free or subsidized |
| Demerit Goods | goods which include substantial external costs are termed....... A..... is one which the government feels that people are over consuming and which therefore ought to be banned or taxed |
| Public Goods | A..... is defined as a good or service which has features of non-rivalry and non-excludability and as a result would not be provided on the free market (e.g. School Sport) |
| Marginal Private Cost (MPC) | is the cost to the individual of producing an additional unit of a good |
| Marginal Private Benefits (MPB) | is the benefit to the individual from consuming an additional unit of a good |
| Marginal Social Cost (MSC) | is the cost to society or producing an additional unit of a good |
| Marginal Social Benefit (MSB) | is the benefit to society from consuming an additional unit of a good |
| The free market equilibrium results in; | overproduction, allocative inefficiency, and a welfare loss |
| Macroeconomics | is a branch of the economics field that studies how the aggregate economy behaves. In ....., a variety of economy-wide phenomena is throughly examined |
| Gross Domestic Product (GDP) | is a monetary measure of the market value of all finished goods and services, provided in a period of time |
| GDP per Capita | is a measure of the total output of a country that takes GDP and divides it by the number of people in the country |
| Growth Rates and Sport | sport organizers or team franchises are using analytics to boost their revenues, by generating insights from historical data to predict potential trends and analyze the effects of certain business decisions |
| Unemployment | is a term referring to individuals who are employable but are unable to find jobs |
| The costs of Unemployment | - to the unemployed themselves - to family and friends - to society at large |
| Taxation | changes in ....... and benefits can cause significant changes to the disposable element of disposable income |
| Inflation | is the rate of increase in prices over a given period of time |
| Balance of Payments | summarizes the economic transactions of an economy with the rest of the world |
| Big Mac Index | informal way of measuring the purchasing power parity (PPP) between two currencies and providing a test to which market exchange rates results in goods costing the same in different countries. |
| Interest Rates | are the cost of borrowing money. ..... are normally expressed as a percentage of the total borrowed. ...... also show the return received on saving money in banks or from an asset. |
| Equity | is linked to the concept of merit goods. It is on this basis that it has often been argued that the direct provision of such goods is more acceptable than a reallocation of income |
| Egalitarian | all members of society receive equal goods and services |
| Utilitarian | maximizes the sum of individual utilities; benefiting to the most amount of people |
| Rawlsian | maximizes the utility of the least well-off |
| The Benefits of Playing Sport | - the wellbeing/happiness of individuals involved - improved health and education - reduction in youth crime - environmental benefits - community development - benefits to society through volunteering |
| Public Sector Sport in NL | the public sectors are institutions that are funded by money collected from the public in the form of direct or indirect taxes such as council tax, VAT on spending, and national insurance |
| What is the voluntary sector in sport? | the voluntary sector pushes towards health and wellbeing, while building programs that bring communities together. These programs often work towards social inclusion for those who can neither afford sport on their own or attain disabilities |
| Why doesn't the public sector provide all sport provision? | the public sector will tend to supply goods according to a political rule. Under these circumstances it is likely that some consumers will be left dissatisfied, as simple rules are unlikely to cope with the required variation of benefits. |
| The economic benefits of volunteering in sport; | - the benefits to the individual and to society more generally through volunteering. - voluntary work contributes to the wider charitable objectives of sports organizations |
| Challenges for the voluntary sector; | - Recruiting and retaining members in a more competitive leisure market - Recruiting and retaining volunteers - Developing new volunteers - Gaining access to facilities at a cost, quality, and time required - Complying with legislation |
| Benefits of Globalization | - Improved communication - A more open world - The advent of new, better, and cheaper products - The reduction in barriers to trade - Contribution to faster economic growth |
| Concerns of Globalization | - Deterioration in the wellbeing of particular groups - The sovereignty and identity of countries - Lack of sensitivity to host culture - The health of the environment |
| What drives international trade? | the fundamental force that generates trade between nations is a comparative advantage |
| National comparative advantage | is the ability of a nation to perform an activity or produce a good or service at a lower opportunity cost than any other nation |
| Tariffs | is a tax on a good that is imposed by the importing country when an imported good crosses its international boundary |
| Import Quotas | is a quantitive restriction on the import of a good that limits the maximum quantity of a good that may be imported in a given period. |
| Other import barriers | health, safety, and regulation barriers |
| Export Subsidy | is a payment made by the government to a domestic producer of an exported good. |
| Export Subsidies | brings gains to domestic producers, but they result in overproduction in the domestic economy and underproduction in the rest of the world and so a deadweight loss is created. |
| Unrestricted international trade benefits all; | the source of prosperity in free trade arises from each country generating gains from specialization in their comparative advantage, minimizing its own opportunity costs of production, and sharing in each of the other country's gains. |
| The National Security Argument | a country must protect industries that produce defense equipment on which the defense industries rely for their raw materials and other intermediate inputs. |
| The infant-industry Argument | is that it is necessary to protect a new industry from import competition to enable it to grow into a mature industry. |
| The Dumping Argument | dumping occurs when a foreign firm sells its exports at a lower price than it costs of production |
| Predatory Pricing | when a firm sells below cost in the hope of driving out competitors. |
| Scarcity | the central economic problem is that of.... |
| Microeconomics | deals with the activities of individual units within the economy: firms, industries, consumers, workers, etc. |
| Choices | because resources are scarce, people have to make.... |
| Rational choices | involve weighing up the marginal benefits of each activity against its marginal opportunity costs. |
| Opportunity costs | Opportunity costs represent the potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. |
| Wants | are unlimited desires or wishes people have for goods and services |
| Why does a change in price change the quantity demanded? | Substitution effect, Income effect |
| Demand Curve | shows the relationship between the quantity demanded of a good and its price when all other influences on consumers planned purchases remain the same |
| Other determinants of demand | tastes, number and price of substitute goods, number and price of complementary goods, income, distribution of income, and expectations |
| Resources and technology | determine what is possible to produce |
| Law of Supply | the lower the price of the good, the smaller is the quantity supplied |
| Is price the sole determinant of supply? | costs of production, profitability of alternative products, aims of producers, number of suppliers |
| Sport Policy Organizations | carry out central and local governments' policies or provide funds to sports organizations |
| Factors that influence the elasticity of demand | the closeness of substitutes and the proportion of income spent on the good |
| Elasticity explained | most goods and services are elastic because they are not unique, but have substitutes |
| Income Elasticity of Demand | the ..... measures how the quantity demanded of a good responds to a change in income, other things remain the same |
| Superior (Normal) or Inferior | calculation of income elasticity of demand enables an organization to determine whether its goods and services are superior (normal) or inferior |
| Normal/Superior goods | as goods whose demand increases as income increases. Their income elasticity of demand is positive |
| Inferior goods | as goods whose demand falls as income rises. Their income elasticity of demand is negative. |
| Income Elasticity in action | knowledge of ....... is useful in predicting future demand in the leisure and tourism sector |
| Cross Elasticity | measures the responsiveness in the quantity demanded of one good when the price for another good changes |
| Strategy | is the direction and scope of an organization over the long-term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations |
| Benefits of Strategic Management | ........ allows an organization to be more proactive than reactive in shaping its own future. It allows an organization to initiate and influence activities and thus exert control |
| Factors influencing organizational purposes | Corporate governance, stakeholder views, business ethics, cultural context |
| Key drivers of change | the environmental factors likely to have a high impact on the success or failure of strategy |
| PESTEL | Political, Economic, Socio- cultural, Technological, Environmental, Legal |
| Key Aspects of Porter's Five Forces Model | Identify key aspects or elements of each competitive force that impacts the firm. Evaluate how strong and important each element is for the firm. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry |
| Porter's Five Forces Model | Industry competitors, Potential entrants, Buyers, Substitute products, Suppliers |
| Key Aspects of PESTEL analysis | Not just a list of influences. Need to understand key drivers of change. Drivers of change have differential impact on industries. Focus is on future impact of environmental factors, combined effect of some of the factors likely to be important. |
| Growth by internal expansion | Product differentiation, Vertical integration, and Diversification |
| Growth by external expansion | Horizontal expansion, Vertical expansion, Conglomerate expansion |
| Four market types; | Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly |
| Perfect Competition | Many firms and many buyers. All firms sell an identical product. No restrictions on entry of new firms to the industry. Firms have to accept the market price. e.g. world markets in rice and wheat. |
| Monopolistic Competition | Each firm provides similar but slightly different products (product differentiation). Each firm possesses an element of market power. No restrictions on entry if new firms. |
| Oligopoly | A small number of firms compete. The firms might produce almost identical products or differentiated products. Barriers to entry limit entry into the market. (e.g. Nike, Adidas, Puma, Reebok) |
| Monopoly | One firm produces the entire output of the industry. There are no close substitutes for the product. There are barriers to entry that protect the firm from competition. |
| Determining market structure of an industry | economists measure the extent to which a small number of firms dominate the market |
| Benefits of free markets | Economic efficiency, Allocative efficiency, Consumer sovereignty, Economic growth |
| Criticisms of the Market Solution | Reservations about consumer sovereignty, externalities, public goods, realities of economic growth, equity |
| High minimum prices | to protect businesses |
| Low maximum prices | to protect consumers |
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