The Economics Of Sport and Leisure

1. The Economics Of Sport and Leisure

2. Content • 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

3. Sport and Leisure Industries • The sport and leisure industries covers the following: • Holidays and travel • Film industry • TV • Theatre • Sports

4. 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

5. Shifts in the demand curve for leisure events • Shifts in the demand curve for leisure events can be caused by: • 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) • 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

6. 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

7. Shifts in Supply Curve • The following factors can cause a shift in supply: • Profitability of other goods / services • Technology • Costs of production / supply • Natural shocks • Social factors • Expectations of producers

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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.