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Explain economic foundations relevant to the sports and
entertainment marketing industry.
Explain the concept of economics
A. Explain economics and identify basic economic resources.
1. Economics is the study of how to meet unlimited wants and needs of a society with its
limited resources.
2. Resources include all things used in producing goods and services.
3. Economic resources are land, labor, and capital resources that can be used to produce the
goods and services that people consume.
a. Land, also known as a natural resource, includes everything contained in the earth and
found in the sea.
b. Labor, also known as human resources, includes all workers in the economy, including
full- and part-time workers, managers, public employees, and professional people.
c. Capital includes the money needed to start and operate a business, as well as goods
used in the production of other goods. Capital resources can be limited because they
deteriorate through use or are of poor quality. For example, machinery such as an
oven at a pizza restaurant.
4. Scarcity is a condition in which more goods and services are desired than are available.
Scarcity forces people, businesses and nations to make choices. Unlimited wants with
limited resources results in scarcity.
5. Economic goods are tangible items. For example, a television or baseball bat.
6. Economic services are intangible. For example, going to a play or attending a baseball
7. Entrepreneurship incorporates the skills of people who are willing to take the risk of starting
their own business. Entrepreneurs organize economic resources in order to create goods
and/or services needed and desired in an economy.
B. Describe the five economic utilities.
1. Utility refers to the added value or usefulness of a product.
2. Five types of economic utility.
a. Form utility is the value added by changing raw materials or putting parts together to
make them more useful. For example, wood for a baseball bat.
b. Place utility is the value added by having a product where customers can buy it. For
example, selling movie tickets at the movie theatre.
c. Time utility is the value added by having a product at a certain time of year or a
convenient time of day. For example, selling lemonade at the Verizon Amphitheatre for
a concert in the summer.
d. Possession utility is the value added by exchanging a product for some monetary value.
For example, a consumer pays $25 for a t-shirt at a concert.
e. Information utility is the value added by communicating with the consumer. For
example, visiting the Meymandi Concert Hall website ( to find out
information about upcoming events.
C. Discuss the three basic economic questions and the role of the government of each system.
1. The three basic economic questions are:
a. What goods and services should be produced?
b. How should the goods and services be produced?
c. For whom should the goods and services be produced?
2. In a market economy, there is little government involvement in answering the three basic
economic questions; the market answers them. Consumers decide what should be
produced. Businesses decide how products will be produced. The people who have the
money to purchase products determine who will receive them.
3. In a command economy, the government answers the three basic economic questions. The
government officials or leaders decide what should be produced. The government runs the
businesses and employs the workers. The government also decides who will receive
4. In a traditional economy, the system is based on the ways things have always been done.
For example, the Amish community and Indian Reservations.
5. Mixed economies are not pure market systems, nor are they completely controlled by the
government. They are a mix, or blend, of the two. All economies presently are mixed
a. Capitalism. The people elect the government officials who represent their constituents’
interests. For example, the United States and Japan.
b. Socialism. Although most socialist countries are democratic, the socialist economy has
increased government involvement. The government tries to reduce the differences
between the rich and the poor. The socialist model is based on the welfare of the
people. For example, France, Germany, and Great Britain.
c. Communism. Communist countries have a government that is run by one political party
and that party controls everything. People are assigned jobs. Students are told what
type of schooling they will receive. For example, Cuba and North Korea.
D. Explain supply and demand.
1. Supply is the amount of goods producers are willing and able to produce and sell at a given
price during a certain period of time. Producers prefer to supply when the price is high; this
is known as a sellers’ market.
2. Demand is a consumer’s willingness and ability to buy products at a given price during a
certain period of time. Consumers prefer to buy when the price is low; this is known as a
buyers’ market.
3. The Law of Supply and Demand is an economic principle that states the supply of a good or
service will increase when demand is great and decrease when demand is low.
a. Elasticity is the degree to which demand for a product is affected by its price. For
example, when the price of a Tampa Bay Buccaneers authentic jersey rises by 10% the
quantity demanded falls by 26%. Demand is price sensitive.
b. Elastic demand refers to how changes in the price of a product affect demand for that
product. For example, when the price of a CD is reduced, demand may increase.
c. Inelastic demand refers to a condition in the market where changes in the price of a
product have very little affect on the demand for that product. For example, some
people might be willing to pay any price for Super Bowl tickets.
4. Factors that affect the elasticity of demand
a. Availability of substitutes. If a substitute is easily obtainable, demand becomes more
elastic. For example, Walt Disney World, SeaWorld Orlando, Universal Studios Orlando,
and Busch Gardens Tampa.
b. Brand loyalty. Many customers will only purchase a certain brand of products. In
general, they will accept no substitutes. In this situation, demand becomes inelastic.
For example, fans of the Terry Labonte #5 Kellogg’s Chevrolet Monte Carlo may be
more likely to purchase Kellogg’s brand breakfast cereals over any other brand.
c. Price relative to income. When an increase in the price of a good or service does not
have a major impact on a customer’s budget, the demand is usually inelastic. When an
increase in the price of a good or service has a major impact on a customer’s budget,
the customer most likely will no longer buy a product. In this case, the demand is
elastic. For example, luxury suites versus general admission.
d. Luxury vs. necessity (want vs. need). When a product is a necessity, demand is usually
inelastic. When a product is a luxury, demand is most likely to be elastic. For example,
season tickets to N.C. State football versus gas for your vehicle.
e. Urgency of purchase. If a purchase must be made immediately, demand tends to be
inelastic. For example, front row tickets to Jimmy Buffett’s last concert.
E. Identify the phases of a business cycle and the impact of each on the sports and entertainment
1. The business cycle is the movement of an economy through four recurring phases –
prosperity, recession, depression, and recovery.
2. Explain the phases of a business cycle.
a. Prosperity (Peak)
i. Highest period of economic growth
ii. Low unemployment
iii. High output of goods and services
iv. High consumer spending
v. Increased attendance and purchasing of related merchandise
b. Recession
i. Economic slowdown
ii. Rise in unemployment
iii. Production slows down
iv. Decrease in consumer spending
v. Decrease in attendance and purchasing of related merchandise
c. Depression (Trough)
i. Prolonged recession
ii. Extremely low consumer spending
iii. High unemployment
iv. Drastic decrease in production of products
v. Poverty can result
vi. Lowest point of attendance and few related items are purchased
d. Recovery
i. Renewed economic growth and an increase in output of goods and services
ii. Reduced unemployment
iii. Increased consumer spending
iv. Moderate business expansion
v. Gradual increase in leisure time activities and purchase of related merchandise