Principles

Slembeck's "Ten Principles of Economics" 

presented by Shannon Petrack and Jess Kromray

Scarcity- Economists study situations where needs or wants exceed means. Therefore, people have to make choices. This basically means that if there is not enough products available, people have to make choices on which is the best option. In sports, playoff tickets are scarce because more people want to go to playoff games and there are less opportunities then a normal game making the demand go up.-Mark Frankland

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

           May 3, 2010, from http://www.slembeck.ch/principles

Rationality- Assumed to guide people’s choices or decisions. It is relevant because it allows an individual to consider both the benefits and costs of something before they decide which option to take. People deal with this when they make a decision. In sports, it’s important because you have to look at all angles positive and negative before deciding what is best. An example in the sports industry could be if a sports organization wanted to raise ticket prices but didn’t know if it would be a good idea.  The organization could look at the pros and cons such as bringing in more money with the ticket sales but risking losing fans because of the increase in price.-Troy Engibous and Sean Hughes

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

           May 1, 2010, from http://www.slembeck.ch/principles

Preferences- Refers to the set of assumptions relating to a choice between alternatives. The possibility of rank ordering of these alternatives, based on the degree of happiness, satisfaction, and enjoyment. Slembeck describes this principle as: “People are equipped with fixed and given preferences that allow them to assign utilities to all options, and to choose the option that maximizes (net) utility.”  An example of sport would be that the Milwaukee Bucks have a small market.  Therefore, they have to utilize their options to bring in fans to maximize their profit.  They do this with giveaways or ticket discounts to get people to the game to make the maximum profit.-Michael Ploch

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

       

          May 3, 2010, from http://www.slembeck.ch/principles

Restrictions- People face constraints and they cannot change themselves, and they have to take as given (such as budgets, input cost etc.). Maximization is always constraint by restrictions. An example in sport is leagues that use the salary cap. Teams may want to sign a big player, but some leagues, such as the MLB, have salary caps so that teams cannot gain all the best players in the world.-Ben Allen

Umru, A. (n.d). Slembeck's ten principles of economics (as a 

               discipline). Umru Ayer

               http://umruayar.blogspot.com/2010/03/slembecks-ten-

               principles-of-economics.html

Opportunity Cost- Induced by scarcity, and by the need to make choices. All choices always involve opportunity cost because deciding in favor of one option always means deciding against some other option. There are two main aspects of opportunity cost: 1) Utility maximizing choices induce opportunity cost to be minimal. 2) Choices may be revised when opportunity cost rises. It is an important principle because our life is full of opportunity cost decisions. On almost anything you decide to do on a daily basis could be tracked to an opportunity cost. Whether you’re deciding what to eat or what to do, everything has a “price.” An example in sport would be a professional athlete doing the off-season workout program and attending all of mini-camps vs. relaxing at home with his/her family and friends.-Phil Cook

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

           May 3, 2010, from http://www.slembeck.ch/principles

Economic Principle- The application of rationality to situations of scarcity: Minimize cost with regard to a given goal or maximize utility for a given level of cost or input. The economic principle is basically talking about how when something is not available, prices can go up because it is so hard to get. Or you can make it cheaper and lose everything because you wanted to make it available. Having something that is not available to everyone means that we are going to have to make choices on certain things. The basic point that is trying to be made is where needs or wants exceed means. Therefore, we have to make choices.

An example in sport is going to a New York Yankee game in their new stadium and sitting behind home plate or even in the first level from first base to the third base side. This is an example because the normal everyday fan will not be able to afford those seats because they cost well over $1000 a seat. With most Yankee fans being that of blue collar jobs, this would be a choice that they will have to make: Spend a week’s pay or sit in the nose bleeds and still enjoy the game.-Nick Moraza

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

           May 3, 2010, from http://www.slembeck.ch/principles

Efficiency- Of activities, rules, transactions or distributions is a basic theme in economic     analysis. When producing a sport brand you need to be efficient, which means you need to regulate costs by how much revenue you are going to bring in. For example you will not spend millions of dollars on advertisements if it is only going to bring in a couple thousand dollars in revenue. Will a sports company the does not work efficiently ever prosper as a whole?-John Bahm

Department of economics, University of St. Gallen. (2001). 

            Slembeck's ten principles of economics (as a discipline)" 

            Retrieved April 29, 2010.

Marginal Analysis- A typical way for economists to look at problems. It is used to analyze decisions in terms of marginal benefits and marginal costs.  Marginal thinking is mostly used with economists.  This principle has similar relevance as the rationality principle.  The main difference in this principle is that it deals with the amount of marginal benefits that can be made from a specific decision compared to the marginal costs of the same decision.  An example of marginal analysis could be if a sports organization was not filling up seats at their games and they were trying to decide whether or not it would be a good idea to lower ticket prices and/or offer gifts for fans that come to the games.  The organization has to determine if those incentives will bring enough people to the ballpark that aren’t coming normally compared to how much money you will lose or have to spend to buy the gifts.-Derek Woelffer

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

   

          May 3, 2010, from http://www.slembeck.ch/principles

Equilibrium- A fundamental notion in economic analysis.  Basic economic models deal with the comparison of two or more equilibria .Economists think in terms of equilibria, which are situations where no one has an incentive to change his or her behavior.  The Nash Equilibrium is the most fundamental formulation of the concept of equilibrium as used in economics.  Sport companies need to run with equilibrium because they cannot put any one part of the business about the other.  For example, if you focus too much on concessions at a major league stadium but don’t focus just as much on ticket sales then you will not get the maximum profit that you could if you focused on both equally. –John Bahm

Department of economics, University of St. Gallen. (2001). Slembeck's ten principle of economics (as a discipline)" Retrieved April 29, 2010.

Game Theory- An approach to study situations of interdependence where people have incentives to think and behave strategically. For example, agents choose strategies that will give them the most payoffs depending on what other agents are doing.-Shannon Petrack and Jessica Kromray

Tilman, S. (n.d.). Principles of economics. Slembeck.com. Retrieved 

            May 3, 2010, from http://www.slembeck.ch/principles




Mankiw's "Ten Principles of Economics"

Presented by Phil Cook and Tyler Martin

1. People Face Tradeoffs

To get one thing, you have to give up something else. Making decisions requires trading off one goal against another. 

This refers to how people will make sacrifices to get other advantages. Another way to think about it is that people will give things up such as money or time to gain other products or services.

In the sport industry, franchises will trade players to get a better player or to provide a salary cap decrease. This can benefit either time, but at times they lose a player they like.

How will tradeoffs change as the economy grows or struggles?

Slembeck, T. (2006, January 8). Principles of Economics. WELCOME to

WWW.SLEMBECK.CH. Retrieved April 30, 2010, from

http://www.slembeck.ch/principles -Phil

2. The Cost of Something is What You Give Up to Get It

Decision-makers have to consider both the obvious and implicit costs of their actions. 

This refers to what people think about before they purchase or trade goods. A person must decide whether it is a good value for what they are giving up. The consumer also has to realize that they may not have a full understanding of all the costs that may become evident in the future.

In the Sport Industry, when a franchise trades a player they may gain a better performing player, but they must consider the implicit costs. This could include how the player conducts himself on and off the field or if they are a bad teammate.

How much does the general manager position control the success and financial stability of a franchise?

Slembeck, T. (2006, January 8). Principles of Economics. WELCOME to

WWW.SLEMBECK.CH. Retrieved April 30, 2010, from

http://www.slembeck.ch/principles –Tyler

3. Rational People Think at the Margin

A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost. 

This refers to make sure each business deal makes money for the company or person initiating the deal. The marginal cost must be lower then the marginal benefit for the deal to be rational.

An example in the Sport Industry would be a trade that a NFL team would do. For them to start a trade it must seem to be a benefit for both teams.

How could this be taught at an earlier age to help the economy?

Slembeck, T. (2006, January 8). Principles of Economics. WELCOME to

WWW.SLEMBECK.CH. Retrieved April 30, 2010, from

http://www.slembeck.ch/principles -Phil

4. People Respond to Incentives

Behavior changes when costs or benefits change. How the Economy Works as A Whole

This basically means that all actions by us ( the consumers) change due to the cost of products or benefits. this is relevant in sport because if the price of a season ticket increases the less likely a normal middle class person will be able to afford the ticket. E.g the price of New York Yankee's game.

Examples for this could be: Nike adding on prices due to the recession, or the Yankees tickets being so expensive people just cant afford to attend these games. –Mark

5. Trade can make everyone better off.

• This is important to sport because of all the trades that go on between teams.

• Also the trades that go on between businesses and teams (Sponsorships).

• Example in sport: Trading a top player from a lower tier team to a contending team and the lower team getting money and youth in return.

Question for future: Will we see more trade in the future because money will be such a major issue? –Troy

6. Markets Are Usually a Good Way to Organize Economic Activity

Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resources efficiently. The opposite of this is economic activity that is organized by a central planner within the government. 

Example: When economic activity is controlled by a small number of people (the central planner), the government is controlling what and how much is produced. This does not allow the “invisible hand” to operate and the imbalance of resources is not self-corrected. In this scenario, like in a communist government, it results greater scarcity and lower standard of living for the common man.

When a professional league’s governing body implements laws controlling the salary of players, will it disrupt the competitive balance of the league or help it grow?

Slembeck, T. (2006, January 8). Principles of Economics. WELCOME to

WWW.SLEMBECK.CH. Retrieved April 30, 2010, from

http://www.slembeck.ch/principles - Tyler

7. Governments Can Sometimes Improve Market Outcomes

The invisible hand can work only if laws are enforced and institutions are

maintained which are necessary to a market economy.

Example: Property right enforcement is the most important thing a

government can do. If the property rights of a storeowner are not

enforced any criminal could steal without the threat of prosecution.

This would result in irreparable losses, thus reducing the companies

to do business in the marketplace.

REFERENCE:

Slembeck, T. (2006, January 8). Principles of Economics. WELCOME to

WWW.SLEMBECK.CH. Retrieved April 30, 2010, from

http://www.slembeck.ch/principles –Lynn

8. Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living.

Similarly, as a nation's productivity grows, so does its average income.  This is relevant because it can be an important idea to keep in your head when you going to start a new business in a new location.  If your new business is put in a place where goods and services can’t be made and completed, your business will probably not do very well.  An example of this could be putting a brand new sport organization in a city where there aren’t many jobs and lots of people without income and jobs.  Yes, it may help the economy, but many of the amenities a sports organization needs cost a large amount of money also.  A question that can be asked for further discussion would be, “Does putting a new team in a low income city actually help the city in more ways or hurt the city?” –Derek

9. Prices Rise When the Government Prints Too Much Money 
 


When too much money is printed, its value decreases because of inflation; that is to say, one dollar is able to buy less than it could before. 

Relevance:

It is plain and simple when a government spends too much money, and they have to start to print off money everything starts to lose its value. When this happens the economy goes down and everything in the economy is affected. If we look at our economy right now we can see how prices rise when the government starts to print off money.

Sport Industry Example:

An example of this would be to look at all of the current big sports on America today. Take a look at the average price to attend one of their events, and then look at the average price to attend one of their events two to three years ago. It is crazy how much prices have risen in the sporting world; it is affecting how we as fans and as consumers go about spending our money now. Because of the jump in prices people who would normally go to games and or events has to make a decision to go and or pay their bills.

Question for Future Discussion:

When and how is the government going to stop printing off money that we don’t have? And when are we going t start to put money back into of economy? –Nick

10. Mankiw’s tenth principle is Society faces a short-run tradeoff between inflation and unemployment. 

This means that unemployment and inflation affect each other.  If more people are unemployed then inflation is going to occur because companies need to make money on the few products they sell because they are not selling as much as they use to.  You can see this in the sports world when you look at ticket prices now compared to six years ago.  The price for a ticket now is much more expensive then the past and that is due to the struggling economy.  Will Society ever be able to stop inflation?

References

Bauman, Y. (2002, June 12). Mankiw's Ten Principles of Economics, Translated for the Uninitiated. Retrieved April 30, 2010, from http://www.smallparty.org/yoram/humor/mankiw.pdf –John