Exercise 4 - 3: Canadian Tourism and Elasticity

Canadian Tourism and Elasticity

Tourism can be a major contributor to economic growth all across Canada . The current state of the tourism industry in Canada has many issues affecting it including an ever increasing travel deficit, decreasing international market share and high taxation and Visa policies.

Canada's travel deficit currently at 14 billion dollars has steadily increased since 2010 as illustrated by Figure 4-3A.


Figure 4 - 3A Canada's Travel Deficit
Source: http://www.tiac.travel/documents/advocacy/gateway_to_growth_june_2011.pdf



Canada is the only country among the top 15 tourist destinations that has not had an increase in international arrivals since 2002. This is an indicator that Canada is falling behind as an attractive destination choice. Figure 4-3B lists the top 15 countries tourist arrivals in 2002 and 2010. A low ranking of 125th among popular tourist destinations in regards to taxation and Visa requirements is also a major deterent for International travellers.(TIAC)



Figure 4 - 3B: International Tourist Arrivals
Source: http://www.tiac.travel/documents/advocacy/gateway_to_growth_june_2011.pdf



The Tourism Industry in Canada is in decline and needs to focus on the following key areas in order to hopefully return to the top 10 of tourism country destinations: an increase in marketing funding, a more competitive government taxation and visa policy, added investment into tourism products like museums, parks, heritage areas, attractions and improvements in training and skills for tourism employees.

(TIAC)

Figure 4 - 3B: Attractions
Source: http://www.tiac.travel/documents/advocacy/gateway_to_growth_june_2011.pdf

Price elasticity is evident in many facets of the Tourism Industry due to the wide amount of substitutes for the Canadian tourism product and a lower percentage of household income due to the downturn of the global economy and looming U.S. economic turmoil. A degree higher than 1 and as high as 2 would be expected in the elasticity of demand of Canadian Tourism products and services.

Source:

http://www.tiac.travel/documents/advocacy/gateway_to_growth_june_2011.pdf

Exercise 4 - 2 Elasticity and Revenue: DVD Retail Example

As reported by the Financial Post, retail sales of items including DVD movies are in decline as they are being replaced by online providers of streaming digital media.

HMV Canada a leader in the DVD retail business is in the process of restructuring after being sold to Hilco UK a restructuring specialist.

Movies as a product are elastic in nature, a hypothetical retail DVD demand model is illustratrated in Figure 4 - 2A.



Figure 4 -2A

Figure 4 - 2B shows total revenue rising when price falls on the elastic part of demand curve and total revenue falling as a result of price falling on the inelastic part of the demand curve.

Figure 4 -2B

References: http://proquest.umi.com.libresources2.sait.ab.ca/pqdweb?index=19&did=2385781741&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1310520611&clientId=5337

Financial Post.  (2011, June 28). HMV sale raises doubt about future of music, DVD retailers. Telegraph-Journal,B.4.  Retrieved July 12, 2011, from Canadian Newsstand Core. (Document ID: 2385781741).



Exercise 3-3 Graph example

Exercise 3-3 Graphing Changes to Demand

Factors contributing to changes in demand include: a change in preferences, increases and decreases in income with relation to normal and inferior products, price of substitute products, price of complementary products, expected future prices and income and population changes in income or age distribution (Sayre,Morris)

An example in a drastic demand for a product would be the movie rental business. The two largest players in the industry, Rogers and Blockbuster, are currently in the process of closing stores, liquidating their inventories and laying of staff. Changes in demand for their product were the factors that led to this.

• Preferences change to online distributors and on demand products which offer easier accessibility and convenience for customers.
• A proliferation of new more affordable products from cable, satellite and internet sources utilizes technology which increased supply and lowered prices.

Exercise 1-2 : Production Possibilitiy Curves

Economic Models using graphs to illustrate production possibilities were given in our economics text, Principles of Microeconomics 6th Edition, Sayre, Morris; The graph curves given in Chapter 1 in Figure 1.1 and 1.2  show the opportunity costs in relation to cars and wheat and the quantity produced. Technological changes as outlined in Figure 1.3, show that consumer and capital goods production with addition of technological improvement give wider choices in regards to increasing production in one or both areas. Economic growth in relation to capital or consumer goods produced is outlined in Figure 1.4, higher capital production will enable faster growth.

The figures give information on scarcity, opportunity costs and choice. Scarcity is applicable to many of society's needs and wants, opportunity costs outline the next best choice of producing something else and choice is the decision of what best to do. These three components are depicted as a curve. The points along the curve show relationships to costs and quantities due to scarcity and the sacrifices incurred due to the choices made in regards to the focus of production.

Personal decisions in my own life due to my economic situation affect most of my decisions regarding what I buy, own and how I spend my time. As a student affordable measures including operating a compact car, accessing  lower rent housing and preparing less costly meals as opposed to eating out have become a reality. Spending less time socializing and enjoying extra-curricular activities is also evident in a demanding scholarly atmosphere.

 A significant opportunity cost I have experienced by returning to school is a reduction in wages earned as well as a high education cost but the benefit is a greater salary potential in the future.