Question

1. Imagine you were living in a city with high unemployment, and a sports team proposed that the government subsidize a new stadium for the team in the city. Discuss why this proposal might be good for the local economy and why it might not be.

Answer 1

Living in a city with high unemployment means that there are huge number of people who don't work(willingly or unwillingly).The reasons for the same could be many.Most of the time there is scarcity of employment opportunities which leaves people without any work.

So,proposal of a new stadium which would be subsidised by the government has its own merits and demerits.

Let's see the merits first :

(a) New project - Being a new project,it will provide employment opportunities to people.

(b) Providing ways to more projects - Once the stadium has been built,it would require catering services or restaurant and more such things to offer to the consumers.

(c) Fitness awareness - The local people may be more aware now of the sports and this could increase the revenue of the people associated with the same.

(d) Multiplier effect - It happens when one dollar is spent and more dollars are generated in the economy.Hence construction of the stadium will increase the flow of money in the economy.Therefore the economy will have a boost.

Let's see the demerits now :

(a) Vanishing of jobs - After the stadium has been constructed,the laborers and the constructors will have no jobs unless there's again a new project.

(b) Return on investment - Economists argue that the subsidised stadium has comparatively less return on investment than in any other activity such as a general store or a cinema hall.

Conclusion :

A sports stadium definitely has an impact on the local economy . However the economists and the local people differ in their opinion.As the stadium will be constructed by the people's money paid to the government(aka taxes) , there are better alternatives which the government should consider that could have more impact on the local economy such as a school or a hospital.