


Essay Examination 1

These questions are from the test bank. An "A" answer requires at least three or four intelligent sentences. Some questions may require more sentences if they have multiple parts. 
Lecture 1  An Introduction to Tourism Economics 
1. Please draw a convex Production Possibilities Curve (PPC).
2. What is the difference between a straight line Production Possibilities Curve (PPC) and a convex PPC? 3. What is the definition of tourism economics? The definition has four parts. 4. What are three types of tourism?

Lecture 2  Review of Supply and Demand 
5. Why does the demand function have a negative slope?
6. Please draw the supply functions for two firms: Firm 1 and Firm 2. Show graphically and explain in words how to derive the market supply function. 7. Please draw a demand and supply curve for the hotel market in Phuket, Thailand. Make sure you label the axis. What happens to the hotel market, if the Thai government charges a $100 fee on tourists, as they pass through customs at the airport? 8. Please draw the supply and demand functions for hotel rooms and set the equilibrium price at $50 per night. Make sure you label all the axes, and the supply and demand functions. Assume the government does not impose any price controls on the hotel market.
9. Please draw the market for rental units in Melbourne, Australia. The equilibrium price is $1,000 per month. The Australian government wants to attract more tourists and passes a price ceiling of $500 per month on the rental units.
10. Please draw the market for labor in Thailand. The equilibrium wage is $100 per month. The Thai government wants to boosts wages and passes a price floor of $200 per month on the labor market.
11. What are two definitions of tourism supply? 
Lectures 3  Elasticities 
You may need the following equations:
12. Please define the following terms.
13. Please draw a linear demand function for the airline travel market. Then label each region on the demand function in terms of elasticity. 14. You have the following price elasticities of demand. Explain how firms could increase their revenue by a corresponding price strategy.
15. Please define the cross price elasticity of demand.
16. What is the difference in elasticity for demand functions that are linear and nonlinear?
17. Please draw a nonlinear demand function and select two points on the function. Explain how a price change changes the revenue a firm receives. You are comparing two regions on the graph. 18. You have the following cross price elasticities of demand. Please explain what these elasticities mean.
19. Please define the income elasticity of demand.
20. Please draw a very shortrun supply curve. What kind of elasticity does this curve have?

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