Economics:Supply and Demand

Unit 9

What is financing?

Involves budgeting, finding ways to pay the cost of doing business, managing the cost so that they do not exceed the revenues coming in, and helping customers pay for the products or services.

Forecast A report that is developed to predict the expenses to

be incurred and revenues to be received from an event.

This report is vital to planning for the event.

Financial Statements

Balance Sheet Show the company’s assets and it’s liabilities

at a specific point in time. Difference between assets and liabilities is a

business’s net worth. Income Statement

Shows all revenues received an all expense incurred over a specific period of time.

Shows the companies net loss or profit.

A Little More on Economics

Economic Utility The amount of satisfaction a person receives

from the consumption of a particular product or service.

Sports and entertainment marketers are constantly trying to find ways to increase economic utility.

Four ways to increase utility Form, Time, Place, and Possession

Finding Middle Ground

Finding the balance between producers and consumers is a major challenge of marketers.

Law of Demand: When price goes down, demand goes up When prices goes up, demand goes down Inverse relationship

Finding Middle Ground con’t

Law of Supply: When the price goes up, supply produced goes up. When the price goes down, supply produced goes

down. Balancing

Providing customers information about new products Making products conveniently available Producers must pay attention to what is selling at profitable

prices and quantities and what is not and make adjustments.

Antitrust Laws and Monopolies

Antitrust Laws– Federal and state statutes designed to promote

competition among businesses. Antitrust laws in the United States originated from the laissez-faire excesses that took place in the early 1900s. Effectiveness of antitrust laws is heavily dependent upon enforcement by the powers in charge primarily the U.S. Justice Department.

Monopolies One business controls the entire market

Competition

Allows laws of supply and demand to set prices.

Businesses receive new ideas from their competition.

Merchandise and services improve to compete for business.

Encourages businesses to develop new products and services.

Profit!

All business activities revolve around making a profit.

Unprofitable ventures will eventually run out of money and cease to exist.

Multiple groups or entities come together to create an event, all have the option to gain or lose a profit.

Investors will normally cover all costs of an event before tickets are sold.

Pricing Strategies

Psychological Pricing Prestige Pricing Volume Pricing Promotions Quantity Discounts Trade – In Allowances

How Does This Relate?

Sports and Entertainment Marketers are focused on microeconomics and their relationship with customers.

Marketers goal: To convince consumers to use their

resources on the product and services the marketers offer.

Marketing Abroad

Movie sales are generating more money overseas than in the United States. Example: Titanic

United States Sales - $600.8 Million China Sales – $1,234.6 Million

What does this mean for producers and directors?

Movies Abroad

China has more people than the United States. The market for movies is tremendous. However the Chinese government holds a tight

rein over the content of movies. Marketers must understand the market in which

they are trying to sell to. What movies would likely not be permitted to be

sold in China?

Concerts

Small amount of supply (limited seating) High demand (number of people who want

to come) Result:

Increased prices on tickets Possibly add additional shows