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Tourism Investment Monitor

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MPE 781/981- Economics for Managers Trimester 2, 2015
Assignment: Economics Case Study
Due: 7th September (Monday, 11:59 pm), 2015.
I. Assignment Overview: This assignment is based on an article “Tourism Investment Monitor,” by Tourism Research Australia, May 2015. The article is already attached to this assignment question. Please read the article carefully before attempting this exercise. You will also need to draw on other resources available through the library as well as external resources. Please note that you need to provide clear references for your sources when citing research and data.
II. Learning Objectives: This assignment is d e s i g n e d to encourage you to think about the application of concepts learned in this unit in a real world scenario. This assignment, indeed, is interesting as it explains how the existing economic theories can explain markets like tourism in particular, how Government policies can shape up the tourism industry of a country. We hope that this assignment will expand the horizon of your thoughts.
III. Assessment: Your score on this assignment contributes towards 40% of your final score for this unit. Based on the attached Rubric, your assignment will be graded on your use of appropriate economic theory and concepts, clarity of exposition and overall quality of your answers. Although you can work in group, this is not a group assignment and you must submit answers individually.
IV. Submission: This assignment must be submitted electronically on CloudDeakin (CD) Dropbox area by all students by 11:59pm on the due date. No hard copy is required. Print your name and student ID clearly on the first page of your answers. Please check the Academic Honesty and Misconduct section in the Unit Guide. Submitting your answers automatically implies that you
have read and accepted the Plagiarism and Collusion Declaration, and that the submitted answers are entirely your own work.
V. Questions: Answer all questions. Limit the total word count of your assignment to less than 3,000 words. You are encouraged to 1provide necessary graphs, figures and tables with data wherever possible, which are not subject to word limit. Please be careful in implementing
referencing styles.
Question 1: (8 marks)
In your own words, summarize the article, “Tourism Investment Monitor,” by Tourism Research Australia, May 2015. In particular, what are the main messages of the article? [Hint: Please link your summary with relevant economic theories wherever you can]
Question 2: (8 marks)
Use appropriate diagrams to answer: Do you think increasing investment in Australian tourism industry is a prudent economic policy for the future sustainability? Why or why not? [Hint: Please do an extensive literature review to find out the pros and cons of the global tourism industry, their short term and long term impacts, etc.]
Question 3: (8 marks)
Suppose that the Australia’s hospitality industry is perfectly competitive (i.e., many hotel and/or accommodation providers). The federal government decides to levy a buyer’s tax (specific tax) on hotel accommodations. Use appropriate diagrams to answer:
(a) Examine the impacts of this buyer’s tax on the equilibrium rental prices, consumer surplus, producer surplus, and total surplus (or social welfare).
(b) Can an increase in the buyer’s tax raise social welfare?
(c) Can an increase in the buyer’s tax raise the federal government’s revenue?
Question 4: (8 marks)
Suppose that the tourism department’s prediction of increased tourism activities and investment has been proved right. Use appropriate diagrams to answer [Hint: Let’s assume the labor market in tourism industry is perfectly competitive]:
(a) What should be the new wage level in the tourism industry?
(b) If due to huge union pressure, the government sets minimum wage above this equilibrium wage, what should be the consequence? What would happen to social welfare?
Question 5: (8 marks)
Find three other countries or economies who are among the leaders in global tourism market. Give a brief description about their tourism industries [Hint: If possible present concrete fact and figures]. Provide your views or suggestions on the best measure to promote Australian as a highly sought tourism destination based on your research on the above three tourism based successful economies.

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The Tourism Investment Monitor is a report of how the tourism industry of Australia performed in the year 2014. The tourism investment environment is one the main area examined by the article. The recent economic trends show that the economy of Australia grew by 2.7 per cent, which was fueled by increased exports of goods and services, household consumption, dwelling investment and non-dwelling new building construction.  According to the vicious circle development theory, tourism initiates an additional demand stimulus to investment, which was experienced by the economy (Chien-Chiang and Chun-Ping, 2008). The investment environment of Australia is one of the most attractive globally, which has enabled the industry sentiment in the country’s tourism industry to remain positive. The future for Australia’s tourism industry is positive because investment in the country’s tourism industry continues to remain positive for both domestic and foreign investors. Increase in foreign investors is key for the growth of the industry as evidenced by the dependency theory, which suggests that tourism depends on foreign supplies. The industry performed well in 2014, with a very strong growth in the demand for tourism services, which resulted, to a solid economic performance (Dwyer, Forsyth, Jago, Deery & Lundie, 2007)

The Tourism Investment Monitor by the Australian Tourism Research, May 2015 is an estimate of the number and overall value of the large-scale projects in the Australia’s tourism investment pipeline in 2014. The article reveals the progression of large-scale projects and how they have improved as compared to last year, with a clear indication of the viable projects entering and progressing through the pipeline together with the number of project completions. These projects consistent of aviation, arts, recreation and business and lastly, the infrastructure projects. These three main projects make up the key tourism industries in Australia in terms of its investment and supply. The size and the value of the tourism investment pipeline experienced a continued growth with a total of 168 projects worth $53.7 in 2014. The pipeline included aviation investment of 13 airport infrastructure projects valued at $10.9 billion and aircraft fleet investment worth $20.4 billion totaling up to 31.3 billion. Investment in arts, recreation and business services included 57 infrastructure projects valued at 13.9 billion. The 8.5 billion in accommodation investment amounted to 15,915 new rooms in the accommodation supply. The Rostov economic development theory suggests that there are several factors that have an impact on tourism development; including infrastructure development and capital investment in the tourism sector. Improvement in the progress of these projects saw a growth in the tourism industry of Australia (Dwyer, Forsyth, Spurr & van Ho, 2005).

The monitor also revealed the opportunities for the Australian Tourism industry. The growth in mixed-use development was one major opportunity identified by the monitor. In addition to this, the issue of a blocked pipeline was also identified. The mixed-use development was identified as an important factor that could significantly increase the volume and value of accommodation investment. Its growth was fueled by scarcity of prime land in the central business districts making the mixed-use projects to receive increasing attention from investors especially from Asian investors. The year 2014 saw an improvement in project progression through the pipeline and the country only needs to increase the supply and improve its tourism product offering for the tourism industry to be globally competitive

 

 

 

Question 2

Do you think increasing investment in Australian tourism industry is a prudent economic policy for the future sustainability? Why or why not?

 

 

Question 3

Suppose that the Australia’s hospitality industry is perfectly competitive (i.e., many hotel and/or accommodation providers). The federal government decides to levy a buyer’s tax (specific tax) on hotel accommodations.

(a) Examine the impacts of this buyer’s tax on the equilibrium rental prices, consumer surplus, producer surplus, and total surplus (or social welfare).

 

(b) Can an increase in the buyer’s tax raise social welfare?

 

  1. c) Can an increase in the buyer’s tax raise the federal government’s revenue?

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