The Kentucky Derby: Implications and Economic Indications

523 Words Feb 17th, 2018 2 Pages
With millions of dollars flowing into this race for three-year-old thoroughbreds, this unique event is historically an indicator of economic success and growth. Thoroughbred horses are costly and unpredictable investments. The prices paid for a thoroughbred reflect the general willingness of horse owners to take risks and therefore a forecaster of the risk-taking atmosphere of the country in general.
The cost for a Kentucky Derby horse can range greatly, with the most expensive winning derby horse having a purchase rate of $4 million USD (ESPN). In 2014 the median cost for a derby horse was $200,000 USD. A winning horse can have returns of up to three or four times their worth. In periods of economic downfall such as the recession of 2008 the Kentucky Derby also experienced lowered median prices of thoroughbreds, and in periods of economic growth prices have traditionally soared (Business Insider). The market for thoroughbred racehorses is one with inelastic supply, because there is only a relatively small fluctuation of horses bred each year, and elastic demand. Demand is elastic in this market because it fluctuates with the wealth of purse holders. When money is scarce people become more risk averse which causes large investments, such as racehorses, to be much more rare. Most people are risk averse, which means that they stray away from…
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