Transcript The Economics Of Sport and Leisure

The Economics Of Sport and Leisure
Content
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Sport and Leisure industries
Demand and supply analysis of leisure events
Income elasticity of demand and leisure activities
Monopolies in the leisure sector
Exchange rates and the travel industry
Sport and Leisure Industries
• The sport and leisure industries covers the
following:
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Holidays and travel
Film industry
TV
Theatre
Sports
Demand and Supply Analysis Of Leisure
Events
• Demand and supply interact resulting in an
equilibrium price for leisure events
• Generally the higher the price of the product / event
the less is demanded
• The demand curve shows an inverse relationship
between price and quantity demanded
• If price changes then you would move along the
demand curve to calculate any change in quantity
demanded
Shifts in the demand curve for leisure
events
• Shifts in the demand curve for leisure events can be caused by:
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Prices of other goods – either substitutes (other leisure events) or compliments
Incomes
Tastes and fashions
Consumer expectations
Advertising
Population level and structure
These factors can enable the demand curve to shift to the:
– Left (less demanded at each price)
– Right (more demanded at each price)
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For example fashion and tastes could change meaning rugby becomes more
popular so the demand for rugby increases shifting the demand curve out
The current performance of British teams and individuals influences the demand for
sporting events if British teams / individuals are doing well demand is likely to be
higher
Supply of leisure events
• The supply curve shows the relationship between price and
quantity demanded
• The supply curve generally slopes upwards at higher prices
more is supplied
• There is a positive relationship between price and quantity
supplied
Shifts in Supply Curve
• The following factors can cause a shift in supply:
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Profitability of other goods / services
Technology
Costs of production / supply
Natural shocks
Social factors
Expectations of producers
Demand and Supply Curve and leisure
events
• The demand of leisure activities has increased in
the UK as peoples incomes have risen
• Changes in tastes / fashions and technology have
also helped fuel the increase in demand
• Since the 1960’s people have been spending more
time and more money on leisure activities
Income elasticity of demand and leisure
activities
• Income elasticity of demand measures how
responsive quantity demanded is to a change in
income
• Generally for leisure activities demand is elastic so
when income increases demand increases by a
greater proportion
• This is because leisure activities are seen as
luxuries
Income elasticity and leisure activities
• Elasticity of specific activities is influenced by the
following factors:
– Number of substitutes – many leisure activities have lots
of substitutes – if the price of going to the cinema
increases people may rent films or go bowling instead
– The % of income spent on the product – if leisure
activities are relatively cheap e.g. the cinema they are
likely to be more inelastic than more expensive activities
such as holidays
Monopolies in the leisure sector
• Monopolies are examples of market failure
• In some sectors of the leisure industry there tend to
be large companies that dominate the market
• This is apparent in the travel industry where travel
agents are dominated by Thomas cook and airtours
in the UK
• Cinemas also tend to be dominated by large
companies such as the Odeon, vue and UCI
Monopolies in the leisure centre
• The markets tend to be more like oligopolies in
nature
• This means that the firms often set prices which
leaves the consumer with less choice
Exchange rates and the travel industry
• Exchange rates influence the demand for holidays
• If the £ is strong then the relative cost of going on holiday is
lower and therefore demand for holidays is likely to
increase
• The exchange rate between the £ and other currencies will
influence the demand for holidays to different countries
• Recently the $ has depreciated in value against the £
therefore holidays to the USA are cheaper and there has
been an increase in demand for these
Summary
• Sport and Leisure industries cover holidays, film, TV and cinema
• The price and quantity of leisure events demanded or supplied is
influenced by the interaction between the demand supply curves
• Shifts in the demand curve such as increased incomes have
increased the demand for leisure activities
• Leisure activities tend to be income elastic as they have lots of
substitutes and are luxuries
• Holidays are income elastic as they take a large proportion of
peoples incomes
• Some areas of the leisure sector like holiday companies and cinemas
are dominated by large companies which set prices
• Exchange rates influence the demand for holidays. When the £
appreciates more people will go on holiday as it is relatively cheap.