﻿ Ken Szulczyk's Exam 1 for Tourism Economics
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# Essay Examination 2 Tourism Economics Analysis

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 4 - Welfare Measures

1. (a) Please derive graphically a Marshallian demand function from a set of indifference curves and budget lines.

(b) Please show graphically the consumers' surplus for a Marshallian demand function for price, P*.

(c) Criticize the statement that a Marshallian demand function is a good measure of welfare.

2. (a) Please derive graphically a Hicksian demand function (Compensating Variation) from a set of indifference curves and budget lines.

(b) Appraise the measure of compensating variation used as a welfare measure in tourism economics.

(c) Appraise the measure of equivalent variation used for as a welfare measure in tourism economics.

(d) What is contingent evaluation, and how does it apply to tourism economics?

3. (a) Why do demand functions have a negative slope?

(b) Distinguish a Giffen good from a standard, normal good.

(c) What are the necessary conditions for a Giffen good to exist?

(d) Distinguish a Veblen good from a standard, normal good.

## Lecture 6 - Macroeconomics and Tourism

4. (a) You are given the equations below. Please solve for the equilibrium GDP.

Aggregate Expenditures (AE):           AE = C + Ig + G + X – M
Consumer spending:                           C = A + (MPC) (GDP)
Imports:                                               M = m (GDP)
Equilibrium Condition:                       AE = GDP

(b) Identify the multiplier that you would use for tourists’ spending?

5. (a) What are leakages, and why are they important for tourism economics?

(b) Evaluate the three common ways tourist spending can leak from a tourist destination.

(c) Identify the problems with leakages for small tropical islands and developing countries.

6. (a) What is the Keynesian multiplier?

(b) If tourists’ spending is \$10 million per year at a tourist destination and the multiplier is 1.3, what is the change in the economy’s GDP?

(c) Could the multiplier work in reverse, if a major employer closed down?  Please explain.

7. Please draw the two straight lines and label the equilibrium GDP and AE.  The equations are:

AE = C + G + Ig + Xn
AE = GDP (the 450 degree line)

(a) What happens if a shock causes GDP to be higher than equilibrium?

(b) What happens if a shock causes GDP to be lower than equilibrium?

8. (a) Why is tourists’ spending called the invisible exports?

(b) Why is inflation a problem at tourist destinations?

(c) Please calculate the dependency ratio for Malaysia, if Malaysia had 2.1 million tourists from Indonesia, and a total of 24.7 million tourists in 2011.

## Lectures 7 - Tourism and Economic Development

9. The following questions are about the tourist industry in Bali, Indonesia.

(a) Appraise the change in Bali’s caste system from tourism.

(b) Appraise the change in migration in Bali, Indonesia from tourism.  Please include conflicts between the locals and migrants in your evaluation.

(c) Judge the importance of jobs and incomes in the informal sector of the Bali tourism industry.

10. (a) Identify the three benefits of using foreign investment in a developing country’s tourist industry.

(b) Identify the three problems of using foreign investment in a developing country’s tourist industry.

11. (a) What is the informal sector of the tourist industry in a developing country?

(b) Appraise the wages and work conditions in the informal sector of the tourist industry in a developing country.

12. What are three characteristics of a developing country?

13. (a) What is dependency theory?

(b) What are the three eras of dependency for the Southern countries?

14. (a) What is modernization?

(b) What are three characteristics of the new definition of development?

## Lectures 8 - Sustainable Tourism

a) What is mass tourism, and why is it destructive to the environment?

b) Distinguish sustainable tourism from mass tourism.

c) What is the definition of sustainability?

16. Please define the following terms:

a) What is a physical carry capacity of the environment?

b) What is the economic carry capacity of the environment?

c) What is the ecological carry capacity of the environment?

d) What is the perceptual carrying capacity of the environment?

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