Canada's Tourism Industry and Income Elasticity

    Making a significant recovery, tourism is among the fastest growing industries, following our recent economic recession. It is estimated that transportation, accommodation, food and beverage services, and recreation and entertainment sectors will contribute nearly 600,000 jobs to the Canadian economy this year. Also, tourism spending in Canada has increased for nine consecutive quarters for a total gain of 8.2%. Contributing most to this increase were amounts spent on passenger air transport and vehicle fuel. Emerging markets in China, Brazil, Mexico and India have lead to a significant impact in Canada's arrivals growth.
   
    As an employee of Ric's Lounge and Grill, located in the Four Points Sheraton hotel, I have personally watched our sales double over the past year. This is no surprise since Tourism Calgary is celebrating a year of accomplishments. I am lucky to be reaping the benefits of an 8.1% tourism growth, the largest of any major Canadian city. With the launch of government programs such as, "Federal Tourism Strategy", it is expected that we will see continual growth within Canada's tourism industry.

   

    Contributions to travel and tourism are highly income elastic. Wealthy families or individuals have a larger percentage of income to spend on luxuries, such as travel, while a poor family would have little to no money to disperse among the tourism industry.



References:

http://www.tourism.gc.ca/eic/site/034.nsf/eng/00217.html

http://en-corporate.canada.travel/sites/default/files/pdf/Mediakit/tourism_industry_fact_sheet_july_28_2011_en.pdf

http://industry.travelalberta.com/News/News%20Article.aspx?id=FA4809A4-71EE-4370-8756-789335B5219C

http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/CB/ca_en_cb_Navigate_W11_231111.pdf

http://www.tiac.travel/english/tiactalk/2012/2012_feb_13.htm

http://www.starwoodhotels.com/fourpoints/property/overview/index.html?propertyID=1740

Elasticity and Revenue

    The following Globe and Mail article refers to the low demand for hybrid vehicles, as a result of the high upfront cost.

http://www.theglobeandmail.com/globe-drive/car-life/cheney/hybrids-vs=
-hot-wheels-its-not-easy-being-green/article2339425/page2/

    In the graphs below, I have used fictional numbers in order to depict the elasticity of demand for the hybrid car. The top half of the demand curve is highly elastic. As price decreases from 30,000 to 15,000, total revenue continues to increase. The highest total revenue is reached at the point of unitary elasticity, where the coefficient is equal to 1 and the price 15,000. The demand becomes inelastic at the bottom half of the demand curve. Between the prices of 10,000 to 0, the total revenue decreases along with the price.

    Although green cars provide the long term advantage of saving in fuel costs, and contributing to efforts to save our planet, for the consumer, this does not outweigh the extra expense.

 

References

Cheney, Peter  (2012, Feb 15).  Hybrids vs. hot wheels: It's not easy being green.

The Globe and Mail. Retrieved from;

http://www.theglobeandmail.com/globe-drive/car-life/cheney/hybrids-vs=-hot-wheels-its-not-easy-being-green/article2339425/page2/



Determinants of a Change in Demand

The demand for a particular product can increase or decrease for the following various reasons;

- A consumer's preference toward a good or service plays a large part in the demand for it and can be swayed by things like advertisements, reviews, seasons, celebrities, ect.
- The increase or decrease in a buyer's income will affect their capacity to purchase a product. A normal product will show an increase in demand when income increases and an inferior product will increase in demand when income decreases.
- A change in the price of a related product will also influence a consumer's desire and capability to consume particular goods. Substitute products, which are very similar to one another, will have a direct affect on each others demand, depending on their price. Complimentary products tend to be purchased together, therefore their demands are also inter-related.
- The future expectations of prices, sales, shortages, or incomes will alter when and how much of a good or service is demanded at a particular time.
- The final determinants that can change demand are an increase or decrease in the population or a change in the distribution of who is earning income in a specific demographic.

In the past five years, the demand for Mp3 players has dramatically decreased. Due to a change in the preference of consumers, who are now listening to music on their Blackberrys or iPhones, the need for a portable music device is becoming obsolete. The following table and graph will illustrate the decrease in the monthly demand from 2007 to 2012.


 

Price	Demand in 2007	Demand in 2012
175	100	10
150	200	20
125	300	30
100	400	40
75	500	50

Game On: Managing a Business in a Mixed Economy

    The price of a product or service is the most influential factor in determining a consumer's desire or capability to purchase it. Demand for a product increases when the price is low, and the supply of a product increases when the price is high.. Therefore, in order for buyers and sellers to reach a compromise, the equilibrium price is determined. This is the financial value at which, the quantity demanded is equal to the quantity supplied. (Sayre & Morris, 2009, p.43).
    Much like the McDonald's Game, a mixed economy makes production decisions with the intention of making the highest profit, while abiding by government policies and social standards. Any successful company should realize that to maintain growth over an extended period of time, scarce resources must be managed efficiently. My experience with the McDonald's corporation showed me that by initially over using resources such as; money, pastures, soy production, beef, employees, and advertising, in the beginning of the game, is a recipe for bankruptcy. Consistently striving towards an increase in both supply and demand will further accumulate growth. Some strategies you can use to achieve this are; maintaining competitive and comparable pricing, creating innovative products, advances in operating technologies, adding advertising campaigns, increasing employment to accommodate demand, decreasing the price of production, developing a good reputation, ect.
     As I mentioned earlier, the most important factor in achieving success in this game is how you initially distribute your resources. Specifically, I began with 5 pastures and 1 soy field, to maintain a consistent level of supply. A decreased number of cows on each pasture allowed me to ensure efficient use of raw materials, avoiding over grazing. Adding hormones to the fodder allows for higher levels of production, while hiring one employee for the grill and one person at the register allows you minimize costs and accumulate a higher net profit. This model will allow you to build growth and assets over time and once you are established you can begin playing with other elements for continued development in your market.







References;

- Image retrieved from McDonald's Video Game

http://www.mcvideogame.com/game-eng.html

- Sayre, J.E. & Morris, A.J. (2009). Principles of Economics (6th ed.). Toronto, ON: McGraw- Hill Ryerson

Potential Production Outcomes

    The production possibility curves shown in Chapter. 1, correspond to the various outputs the can be produced using a society's limited resources. While examining different combinations that can be generated, full employment, the use of the best technology, and efficient resources are all assumed. The graphs are demonstrating that the choice to produce more of one product will directly affect assembly of the other. If the result of production lies within the curve, full manufacturing potential is not being exercised. Any point depicted outside the curve is not attainable due to scarce resources.
  The law of increasing costs is the reason behind the curve's bowed out shape. It shows us that as particular item's production rises, the opportunity cost of the other item also increases. For example; when 6 cars are gained it is costing .67 tonnes of wheat, and when 4 more cars are manufactured it will sacrifice 1.25 tonnes of wheat. In figure 1.3, we are shown how the curve can shift outward with an increase in scarce resources, in this case technology. The improvement will lead to a decision involving more capital goods and services, more consumer goods and services, or a combination of both. The choice that is made can cause dramatic differences in the growth rate of an economy.
    In my own life, my time has become very limited. Working long, late evenings allows me to take care of myself financially, while paying for distance education. I am left with free time in the mornings and on Sunday, but spend it on school work. Being in a long distance relationship, also requires time and money to commute. By deciding to pursue an education, I have created the opportunity cost of having very little time for myself, and less money to spend on other financial obligations or travel.