ECON2209 Lecture Notes - Lecture 1: Absolute Advantage, Opportunity Cost, Net Present Value
8 Jun 2018
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January 16th
1. Introduction to Sports Economics
○ The Importance of Sports
■ Sports can define people and nations
■ Section of sports in the newspaper
■ Industry of sports are relevant
■ Can be used as a tool for diplomacy, bring nations together
● Ex: North and South korea
● Ex: The World Cup, his favorite squad Cote d’Ivoire did not
qualify, as well as Ghana, Cameroon, Italy, US did not qualify
■ Provide entertainment, can increase utility
○ Organization of the Text
■ 3 angles
● Part 1: Review
● Part 2: Industrial Organization (CH 2-5) and Competitive Balance
○ Teams, Franchises etc… what is their cost and revenue
structure, why are they in it, is the industry monopolistic,
competitive etc
○ If the same team always wins there is low competitive
balance… less interesting
● Part 3: Public Finance (CH 6-7)
○ Stuff like NPV, is a stadium worth it
● Part 4: Labor Economics (CH 8-11)
○ Important Concepts:
■ Scarcity: Resources are limited, to satisfy unlimited wants ex:
Teams/leagues are all limited in what they can do to achieve objectives
■ Choice: Economics is the study of making choices because of scarcity
■ Trade Offs: Conflicting actions, in order to do one thing, we must give up
something else. To do more of something requires less of something
else, comes from scarcity and choice.
■ Opportunity Cost: The value of what must be given up to obtain
something. Value of the next highest, or best alternative. Used to look at
absolute and comparative advantages(Chapter 1 goes over this a lot)
■ Absolute Advantage: Producing a good using fewer resources. OR
producing more, given the same amount of resources.
■ Comparative Advantage: Producing a good, with a lower opportunity cost.
Need to compare to another. We have to compute opportunity cost
otherwise it is hard to see. Someone could have an absolute advantage
but NOT a comparative advantage.
■ Production Possibilities ex:
● Writing Poems:
● Martha: 10 per hour
● Paul: 12 per hour
● Writing songs”
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