Week Eleven Workshop Questions – 3203THS Tourism and Hotel Economic Analysis

Student Name: Xia YANG Student number: s5078560

Workshop questions:

1. In the simple model of the economy discussed in lectures what flows from households to
firms? Give an example.

In the circular flow model, households consume the goods/service offered by the firms.
Additionally, household also provide factors so that the firms can produce products for
household purchase. For example: household use their income (money) to purchase from a
supermarket. Household also provides labour (employees work in the supermarket) to the
supermarket.

2. In the simple model of the economy discussed in lectures what flows from firms to
households? Give an example.

In the circular flow model, firm offers goods/service to household. Additionally, firm also provide
wages, rent and dividends to household. For example, the supermarket provides food (e.g.
meat) to household to use. The supermarket also gives wages to those who are from household
and work in the meat section in the supermarket.

3. What is GDP and what are the three approaches that can be used to calculate it?

Gross domestic product (GDP) is the total market expenditure on all final goods and service in a
country. The three approaches are:

 Expenditure approach: GDP=C+I+G+(EX-IM) where,

C=personal consumption expenditure - household spending on consumer goods

I=gross domestic investment-spending by firms and households on new capital, plant, equipment,
inventory and new residential structures

G=government consumption and investment

EX-IM=net exports – net spending by rest of the world or exports - imports

 Income approach: GDP=national income +depreciation + (indirect taxes – subsidies) +

net factor payments to the rest of the world

National income is the total income earned by the factors of production owned by country’s citizen

Depreciation is the amount by which asset’s value falls in a given period

Indirect taxes are taxes like sales tax, custom duties and license fee

Subsidies are the payment made by the government for which it receives no goods/services in return
Net factor payment is the payment of factor income to the rest of the world – receipt of factor
income from the rest of the world

 Production approach: gross value added (GVA) = GDP – indirect taxes (e.g. GST) -
subsidies

Total GDP is the sum of gross value added by institutional units that are resident in the economy +
taxes on products and import – subsidies on products

4. In 2015/2016 what were the values of the following indicators?

Total GDP: $1654,864 million
Direct tourism GDP: $52,918 million ($53 billions)
Tourism Share of GDP: 3.2%
Total Tourism Employed persons: 5802,000
Tourism Industry share of total employed persons: 4.9%
5. Write a brief paragraph explaining what these indicators tell us.

The total market expenditure on all the final goods and services in Australia is $1654,864 million
dollar. The direct tourism GDP is the expenditure on tourism in Australia. The tourism share of
GDP indicated how much proportion that tourism has in the overall GDP in Australia. Total
tourism employed persons is how many people are employed in the tourism industry. The
tourism industry share of total employed persons is the percentage of people who are employed
in tourism industry over the total amount of people employed in Australia. Overall, tourism have
a substantial contribution to the economy in Australia.

6. What are the three techniques that can be used to calculate the flow on effects of direct
tourism expenditure?

Multipliers describe the ratio between a change in expenditure and the total value of economic
activity created. The three techniques are Keynesian multipliers, input-output model and CGE
modelling.

 The multiplier (k) shows the amount of by which a change in expenditure in an economy
leads to a change in a national income. The multiplier is calculated by
1
k= leak (save +import +taxes)¿
marginal propensity ¿

the marginal propensity to save is the proportion of extra income saved, the marginal propensity to
import is the proportion of extra income spent on imports and marginal propensity to be taxed is the
proportion of extra income taken in taxes.

 Input-output model is a form of macroeconomic analysis based on the

interdependencies between economic sectors. It usually involves in I-O tables which
show how industries are connected to each other through purchase and sales activities.
The I-O model estimates three types of impact: direct, indirect and induced. For
example, establishing a new building for a chain hotel requires steel, cements,
 equipment, labours and other input, which are the direct impact. Then, the indirect
(secondary) impact would be caused from the supplier who supply these input (e.g.
hiring workers). The induced impact would be the money that these workers spend on
goods/services as they could choose the more expensive ones.
 CGE (computable general equilibrium) model is an analytical approach for assessing the
impacts of major projects and policy changes on the economy. These changes may be
external shocks, like a slowdown in global demand for a given products; they may be
policy changes, like the introduction of an increased tax; or they may be a new project
invested, like the construction of a new museum.

Reflection

Are you finding the concepts in this course difficult?

Not at all A little difficult Somewhat difficult x Extremely Difficult