ECO 330 Exam 1-GVSU – Flashcards
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Increase safety/stability of league Increase competitive balance
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Goal of revenue sharing
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When describing the effect of a change, the outcome may be influenced by changes in other things
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Fallacy of Economics- 1. Violation of the ceteris paribus condition(other things constant)
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An unsound proposal will lead to undesirable outcomes even if it is supported by proponents with good intentions.
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Fallacy of Economics- 2. Good intentions do not guarantee desirable outcomes
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What is true for the individual(or part) is also true for the group
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Fallacy of Economics- 3. Fallacy of a composition
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The incorrect idea that if two variables are associated in time, one causes the other
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Fallacy of Economics- 4. The fallacy that association is causation
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occurs when a person (or nation) is better at doing something than another person (or nation)
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Absolute advantage
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exists where a person's (or nation's) relative advantage is greatest
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Competitive Advantage
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The highest valued alternative that must be sacrificed. EX:Babe Ruth was a talented hitter and pitcher. The Red sox were worse off regarding pitching without him, however, the opportunity cost as a pitcher was worse since he was the best hitter of his time.
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Opportunity Cost
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Willingness/ability S^ D ^
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Supply/Demand
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Many Buyers & Many Sellers Homogeneous Product Easy Entry / Easy Exit In perfect competition, each producer is too small to affect prices
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Perfect Competetition
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One Seller Unique Product Barriers to Entry 1. Patents 2. Control of Key Inputs 3. Economies of Scale 4. Monopoly Franchises Profits can be maintained in long run as long as Barriers to Entry Exist
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Monopoly
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the study of how people choose to use scarce resources to fulfill unlimited wants.
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Economics -
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gaining a specific benefit at the least possible cost or maximizing benefit with a given cost.
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Rational
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Study of "what is"
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positive economics
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study of "what ought to be"
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Normative economics
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`Slopes down
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Demand Curve
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Slopes up
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Supply Curve
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1. Consumer Income 2. Number of Consumers 3. Attitudes, Tastes and/or Preferences 4. Prices of Complementary Products 5. Prices of Substitute Products
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Factors the influence demand
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Factors that can influence overall supply: 1. Costs of Production 2. Technology 3. Number of Sellers Sports Specific Factors 1. Number of Seats 2. Number of Games in a Season 3. Number of Teams Supplying Games
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Factors that can influence overall supply:
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a maximum price that can be charged for a good. Typically, will be set below the equilibrium price.
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Price ceiling
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Shortages Misallocation of Resources Discrimination Black Markets
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Problems associated with price ceilings include:
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Total Revenue - Total Cost
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Profit =
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Marginal Cost= Marginal Revenue
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Profits are maximized when:
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Price * Quantity
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Total Revenue=
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More fans want to see the teams play Demand - and MR - shift right
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What happens when teams raise salaries?
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Percentage Change in Qd divided by the Percentage Change in P If Ɛd > 1, Demand is Elastic If Ɛd < 1, Demand is Inelastic
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Price Elasticity of Demand
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Straight up and down. The price points on the demand curve are the same on the quantity axis
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Perfect Inelastic demand curve
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The price points on the demand curve fall farther from each other on the quantity axis
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Perfect elastic demand curve
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Elastic
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If price goes up and revenue goes down demands elasticity is
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Inelastic
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If price and revenue go up demand elasticity is
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elastic
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If price goes down and revenue goes up demand elasticity is
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Inelastic
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If price goes down and revenue goes down, demand elasticity is
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Percentage Change in Qs divided by Percentage Change in P If Ɛs > 1, Supply is Elastic If Ɛs < 1, Supply is Inelastic If Ɛs = 0, Supply is Pefectly Inelastic
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Price elasticity of supply
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the cost of producing one more unit of output Change in cost/ Change in Quantity
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Marginal Cost
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maximize profits and / or maximize wins.
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A professional sports teams goal is to
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Teams can profit by charging more for more attractive games based on factors known before the season even begins.
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Variable ticket pricing
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allows the team to capture additional revenue based on individual game characteristics that are unknown at the start of the season
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Dynamic ticket pricing
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shows how much output a firm generates from its inputs
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Production function
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Firms should always produce at the last output level, MR is greater or equalt to MC
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Profit max rule
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little effect on budget neccessities general few close substitues short period
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Inelastic demand
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Large impact on budget luxury Specific close substitues long period
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Elastic Demand
