The Economics of Sport and Leisure

The sport and leisure industries covers the following:

  • 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:

  • 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.

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:

  • 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 Elasticities 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.

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.

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