Virtual Business Sports

Pricing

The Main Product of a Sports Franchise is Seats(tickets)

Pricing Conflict

• A team would rather sell a seat for $1 than leave it empty

• However, if all seats are sold for $1, the team will not make a profit

• If prices are set too high there will not be enough demand

• If prices are set too low profits will not be maximized

Goods & Services are Supplied to Consumer Demand

Laws of Supply & Demand

• Law of Demand: The amount consumers are willing to buy varies with price.– Price Demand Price Demand

• Law of Supply: The amount producers are willing to make varies with price.– Price Supply Price Supply

• Law of Diminishing Marginal Utility: Consumers will only buy so much of a product even if the price is low.

If price is too high a surplus will exist

Surplus: Supply exceeds demand

DEMAND

Price Qty.

Demanded

$95 2,000

$80 3,000

$65 3,400

$50 4,600

$35 6,200

SUPPLY

Price Qty.

Supplied

$95 5,000

$80 4,400

$65 3,400

$50 2,000

$35 1,000

Surplus Surplus

If price is too low a shortage will exist

Shortage: Demand exceeds supply

DEMAND

Price Qty.

Demanded

$95 2,000

$80 3,000

$65 3,400

$50 4,600

$35 6,200

SUPPLY

Price Qty.

Supplied

$95 5,000

$80 4,400

$65 3,400

$50 2,000

$35 1,000Shortage Shortage

Equilibrium is the Goal of all businesses

Equilibrium Price – Price in which supply and demand meet at the same price.

Elasticity

The degree to which demand is effected by changes in price

Elastic vs. Inelastic

• Elastic Demand – Changes in price greatly effect demand (luxuries)

• Inelastic Demand – Changes in price does not seriously effect demand (necessities)

• Sports & Entertainment products are elastic in nature.

Factors that must be covered by Prices

• All Costs & Expenses– Breakeven Point: Determining the point at

which business expenses are covered and there is not a loss or profit.

• Profit– Markup(margin): The amount of profit added

to the breakeven point.

Pricing Terms

• Price: The amount of money you charge customers for one unit which should reflect what customers will pay.

• Revenue: Money that is brought into the business, mostly through sales(unit sales x price).

• Demand: Amt. Of goods or services customers are willing to buy at a given price

• Yeild Management Pricing: Pricing strategy used whenever the quantity of a product is fixed(I.E. seats) to maximize profits by selling better tickets at higher prices or when demand increases.