1. 3 The market for recreation, leisure and tourism products

3. Learning outcomes
By the end of this session students should be able to:
identify a market and define the attributes of a perfect market
analyse the factors that affect the demand for a good or service
analyse the factors that affect the supply of a good or service
understand the concept of equilibrium price
analyse the factors that cause changes in equilibrium price
relate price theory to real world examples

4. Definitions Effective demand Ceteris paribus Markets
Perfect market assumption
many buyers and sellers
perfect knowledge of prices throughout the market
rational consumers and producers basing decisions on prices
no government intervention – e.g. price control

5. Markets Patpong night market, Bangkok, Thailand
A market is a place where buyers and sellers come into contact
Do all markets have a physical presence?
Ans: No – eBay, small ads etc.

6. What does it illustrate?
What is this picture?
Exchange rates
What does it illustrate?
Near perfect markets
Why?
Many buyers and sellers
Prices fluctuate freely according to demand and supply

7. The demand for recreation, leisure and tourism products
Demand and own price

8. The demand for recreation, leisure and tourism products
Demand and other factors
Income
Normal (superior) and inferior goods

9. Inferior Goods: Which is the odd one out?A C A B D

10. Answer A = Amusement arcade, Leysdown, UK B = Las Vegas
C = Ist Class Lounge, Hong Kong Airport
D = Ist Class Cabin, B.A
Answer = A
as income rises demand for B,C and D rises but falls for A

11. The demand for recreation, leisure and tourism products
Demand and other factors
other prices
substitutes and joint demand
comparative quality/value added
fashion and tastes
advertising
opportunities for consumption (e.g. leisure time)
population
other factors

12. Joint Demand What’s the connection?
A fall in the value of the Thai Baht can lead to a rise in the demand for holidays to Thailand (ceteris paribus)

13. The supply of recreation, leisure and tourism products
Supply and own price

14. The supply of recreation, leisure and tourism products
Supply and other factors
prices of other goods supplied
changes in production costs
technical improvements
taxes and subsidies
other factors (e.g. industrial relations)

15. Supply and Costs
How does no frills Ryanair cut costs compared to full service QANTAS?
What effect does this have on its supply curve?
Shifts to the right

16. Equilibrium price

17. Changes in equilibrium price

18. P S
A leftward shift in demand (D1>D2) causes price to fall (P1>P2).
What factors would cause a fall in demand for a UK hotel? P1 P2 D1 D2 Q

19. Changes in equilibrium price

20. Supply shifts to left

21. The price mechanism in action
maximum prices
black markets
queues

22. Markets in action
A queue is an indication of a disequilibrium between demand and supply
Arsenal FC: Ticket touts can charge a lot more than official prices

23. Review of key terms Effective demand Ceteris Paribus Perfect market
demand backed by cash.
Ceteris Paribus
all other things remaining unchanged
Perfect market
many buyers and sellers, rational players, perfect knowledge, no interference.
Normal good
demand rises as income rises (also called superior good).
Inferior good
demand falls as income rises.
Substitute
good that can replace good in question
Complement / Joint demand
good that is used with the good in question
Equilibrium price
where demand equals supply.

24. 3 The market for recreation, leisure and tourism products:
The End