Question

In: Economics

a) Explain why economists argue that the economic impact of sports teams is much less than...

a) Explain why economists argue that the economic impact of sports teams is much less than
usually claimed, what it costs the city, and why the city isn’t going to make its money back.

b) Explain in economic terms how a sports league makes the decision to expand or not to

expand. Make sure to explain the economic goals of the league.

Solutions

Expert Solution

Answer)

Yes, the economic impact of sports team is much less than usually claimed . Sports is related to economics as players, coaches and sport agents act as hypothetical decision - makers in the economy. The main incentive behind economic idea is financial or related to money. It is harboured on other factors too like labour market discrimination on race and gender as well as growing competition around the world. These factors show how impact of sports team is less on cost which means they pay less than what is due to the players for their services to the team.

The economic goals of sports league can be enumerated as under :

  • Basic assumption underlying economic models is maximisation of firm's profit. It can be correlated with sports as coach maximizing his team's choice of winning games.
  • Teams being rational have the ability tolearn from past mistakes and behaviour.
  • A sports league is a Monopsony which means one buyer and many sellers of the product. Here, product refers to player's services. The League has market power as it pays less to the player than their contribution to the team.
  • This is the major economic impact as this is the case of market imperfection due to discrimination in pay to the players.

Rahul Sunny answered 2 years ago
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