EWOT Goggles #14

Surprise, surprise, I have another EWOT from my Sports Business Journal. I apologize for the repetition but the articles really do apply to what we are learning in class.

The name of this article is "Practice facilities heat up construction market" and was written by staff writer Don Muret.

Yesterday, I was reading an article about how many Division I universities are investing in multi-million dollar practice facilities for their basketball teams. For this EWOT, I am going to specifically focus on what I read regarding the West Virginia University (WVU) basketball program.

In early January, WVU will open its newly made $23.6 million basketball practice facility. Basketball practice facilities are the newest fad among college basketball powerhouses- teams want them to aid in recruiting (practice facilities clearly are something desirable to have for potential recruits) as well as to have an exclusive place for which only student-athletes can practice and is not open to the general student population.

In the article, it talks about all the many reasons why WVU decided to invest. The one thing I want to mention to connect it to class is the reason that covers the topic of the demand curve.

In the article, it talks about how WVU began construction and paid for the construction of its new practice facility during the recent economic recession. Specifically, the article says "The Great Recession took hold and the bottom dropped out of the construction market, reducing labor and material costs to bargain-basement prices. WVU took advantage of the economic downturn for its [basketball practice facility] project that began four years ago..."

Basically, what the above quote is showing is that the entire demand curve shifted in. Because of the economic recession, people had less money to spend and thus there was less of a demand for construction as a whole (it wasn't just one price that changed. People had less money to spend, so therefore, the entire demand curve shifts in).

Since WVU was not directly impacted by the recession (seems like colleges like WVU were not hit so hard during the recession), WVU made a very smart economic decision. Since prices were down for construction, they bought. They figured that once the economy returned to its normal form, prices would increase. Thus, by buying during the recession, they would be saving money. If they waited until the recession was over, they would have to pay more money. So they decided to buy during the recession.

Now that the economy has begun to return to shape, the demand curve for construction may be shifting back up to where it once was, thus increasing prices for construction. So, as the article states, it does appear that WVU made a very good economic decision- by buying during the recession, when the demand curve shifted down, the school ended up having to pay less money for a very expensive practice facility than they would have if they waited to pay for the building after the recession was over.