3.00 Explain economic foundations relevant to the sports andentertainment marketing industry.
3.01 Explain the concept of economics.
Sports and Entertainment Marketing ISummer 200340
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 jerseyrises 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 demandfor that product. For example, when the price of a CD is reduced, demandmay increase.c. Inelastic demand refers to a condition in the market where changes in theprice of a product have very little affect on the demand for that product. Forexample, some people might be willing to pay any price for Super Bowltickets.4. Factors that affect the elasticity of demanda. Availability of substitutes. If a substitute is easily obtainable, demandbecomes 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 ofproducts. In general, they will accept no substitutes. In this situation,demand becomes inelastic. For example, fans of the Terry Labonte #5Kellogg’s Chevrolet Monte Carlo may be more likely to purchase Kellogg’sbrand breakfast cereals over any other brand.c. Price relative to income. When an increase in the price of a good or servicedoes not have a major impact on a customer’s budget, the demand is usuallyinelastic. When an increase in the price of a good or service has a majorimpact on a customer’s budget, the customer most likely will no longer buy aproduct. In this case, the demand is elastic. For example, luxury suitesversus general admission.d. Luxury vs. necessity (want vs. need). When a product is a necessity, demandis usually inelastic. When a product is a luxury, demand is most likely to beelastic. For example, season tickets to N.C. State football versus gas for yourvehicle.e. Urgency of purchase. If a purchase must be made immediately, demandtends to be inelastic. For example, front row tickets to Jimmy Buffett’s lastconcert.E. Identify the phases of a business cycle and the impact of each on the sports andentertainment industry.1. The business cycle is the movement of an economy through four recurringphases – prosperity, recession, depression, and recovery.2. Explain the phases of a business cycle.a. Prosperity (Peak)i. Highest period of economic growthii. Low unemployment