MANAGERIAL ECONOMICS FOR TOURISM

Semester - III | Elective – II | Subject Code - 18MTT36E

Objectives of the Paper

• To understand the concepts and techniques of micro and macro economics

• To study the importance of tourism & travel industry in strengthening Country’s Economy

• To help acquire skills needed for executive decision making

UNIT-IIntroduction –Tourism Economics –Managerial Concepts – Micro andMacroeconomics -Liberalization, Privatization and Globalization – GlobalMarket Trends – Fiscal and Monetary Policy – Role of Central Bank

UNIT-IITourism Demand - Types of Tourism Demand - Determinants of TourismDemand – Life Cycle Factors - Measurement of Tourism Demand- TourismDemand Forecasting - Methods of Forecasting – Growth of Tourism Demandin India. Case study of Demonetization and its Impacts on Tourism

UNIT-IIITourism Supply – Factors affecting supply- Break Even Analysis – Balance ofPayments – Balance of Trade - Market Structure and Competition - Pricing inTourism - Determinants of Price.

Syllabus

Conti…UNIT-IV

Macro Economic Environment – Inflation & Deflation Analysis -Government’s role in Tourism – Tourism Policies of Government of India:Role of Nidhi Aayog, Public and Private Sectors in Tourism - Need forPublic and Private Sector Co-operation in Tourism – FDI in Tourism

UNIT-VImpact of Tourism - Economic impact - the Multiplier Effect –Tax Revenue(Case Study of GST on Tourism Products) - Displacement Effect - TouristSpending - Costs and Benefits of Tourism to Community - EnvironmentalAspects – Contingency Valuation Method. Case study of Socio-economicimpact of Tourism on Folk Artists in Kerala & Rajasthan

PRACTICAL EXERCISE• 1. Record & evaluate the Foreign Exchange currency fluctuation of INR Vs.

USD & EURO• 2. Debate on post-budget scenario

Introduction to Economics

The word ‘Economics’ originates from the Greekwork ‘Oikonomikos’ which can be divided intotwo parts:

(a) ‘Oikos’, which means ‘House’, and

(b) ‘Nomos’, means‘Management’.

What is Economics???

“Social science that deals with the production, distribution, and

consumption of wealth”

Science [methodology] or Art [Application]

Economic System

•Traditional economic system.

•Command economic system.

•Market economic system.

•Mixed system.

Economics is the study of how people allocate theirlimited resources to produce and consumer goodsand services to satisfy their endless wants or tomaximize their gains.

WhyEconomics?

Father of Modern Economics

What is Business/ManagerialEconomics?

• Managerial economics is a streamof Management studies which emphasises solvingbusiness problems and decision-making by applying thetheories and principles of microeconomics andmacroeconomics.

• It is a specialised streamdealing with theorganisation's internalissues by usingvarious economic theories.

Definition

Mc Nair and Meriam has Defined:-

“Business economic consists of the use of economicmodes of thought to analyse business situations.”

Siegel Man has defined:-

“The integration of economic theory with businesspractice for the purpose of facilitating decision-making and forward planning by management.”

Users of Managerial Economics

SCOPE OF ECONOMICS

• Micro Economics

• Macro Economics

• International Economics

• Public Finance

• Development Economics

• Health Economics

• Environmental Economics

• Urban and Rural Economics

MANAGERIAL ECONOMICS FOR TOURISM

UNIT 1 – MICRO Vs MACRO ECONOMICS

MICRO Vs MACROECONOMICS

• (i) Micro Economics: This is considered to be thebasic economics. Microeconomics may be definedas that branch of economic analysis which studiesthe economic behaviour of the individual unit, maybe a person, a particular household, or a particularfirm.

• It is a study of one particular unit rather than all theunits combined together.

• The microeconomics is also described as price andvalue theory, the theory of the household, the firmand the industry.

• Most production and welfare theories are of themicroeconomics variety.

• (ii) Macro Economics: Macroeconomics may be defined asthat branch of economic analysis which studies behaviourof not one particular unit, but of all the units combinedtogether.

• Macroeconomics is a study in aggregates. Hence, it is oftencalled Aggregative Economics. It is, indeed, a realisticmethod of economic analysis, though it is complicated andinvolves the use of higher mathematics.

• In this method, we study how the equilibrium in theeconomy is reached consequent upon changes in themacro-variables and aggregates.

• The publication of Keynes’ General Theory, in 1936, gave astrong impetus to the growth and development of modernmacroeconomics.

MANAGERIAL ECONOMICS FOR TOURISM

Introduction to LPG

• ThePre-liberalization Era - Prior to 1991

• The Post Liberalization Era - The Present Era.

History of LPG• In 1991, India Faced a huge “Balance of Payments Crisis”.

• It had to Pledge its Gold to ForeignCountries.

• It was a deal with TheIMF.

• Then PM of India, P V Narsimha Rao realized to take some Bold Decision.

• July 1991,India has taken a series of measures to structure the economy and improve the BOP.

• The new economic policy introduced changes in several areas.

• The policy have salient feature which are-:

Liberalization (internal and external)

Extending Privatization

Globalization of the economy

NEED FOR LPG

Initiate rapid economic growth to raise the standard of living, reduce the widespread unemployment.

Become self- reliant and set up a strong industrial base with emphasis on heavy and basic industries;

Achieve balanced regional development by establishing industries across the country;

Reduce inequalities of income and wealth;

Adopt a socialist pattern of development - based on equality and prevent exploitation of man by man;

Employment and poverty stalking the land.

MAJOR OBJECTIVES 1. Utilizing fully the indigenous capabilities of entrepreneurs.

2. Fostering research and development efforts for the development of indigenous

technologies.

3. Raising investments.

4. Removing regulator system and other weaknesses.

5. Improvement in efficiency and productivity.

6. Controlling monopolistic power.

7. Assigning the right areas for the public sector undertakings.

8. Ensuring welfare as also skills and facilities to the workers to enable them to face new technologies.

9. Retaining the capacity to earn our own foreign exchange through exports.

10. To achieve self-reliance

Economic Liberalization in India

It means the process of opening up of the Indian economy to trade and

investment with the rest of the world.

It means that opening the Door for doing Business to all over the world.

Till 1991 India had a import protection policy wherein trade with the rest of

the world was limited to exports.

Foreign investment was very difficult to come into India due to a

bureaucratic framework.

After the start of the economic liberalization, India started getting huge

capital inflows and it has emerged as the 2nd fastest growing country in the

world.

The Policies of Liberalization

Opening the Gate for International Trade and Investment.

Deregulation.

Initiation of Privatization.

Tax Reforms.

Inflation Controlling Measure.

Impact of Liberalization on Indian Economy

Increase in Employment.

Arrival of New Technology or Development of Technology.

Development of Infrastructure.

Identity at World Level.

Increase Our Currency Value (INR).

GDP Growth.

Increase Consumption and Adaptation of New Lifestyle.

Increment of Competition.

Increment in Foreign Investor.

Advantages of liberalization

Development of economy without capital investment.

Increase the foreign investment.

Increase the foreign exchange reserve.

Increase in consumption and Control over price.

Reduction in dependence on external commercial borrowings

Disadvantages of Liberalization

Loss to domestic units.

Increase dependence on foreign nations.

Privatization-:

Privatization means transfer of ownership and/ormanagement of an enterprise from the public sector to theprivate sector .

Privatization is opening up of an industry that has beenreserved for public sector to the private sector.

Privatization means replacing government monopolies with thecompetitive pressures of the marketplace to encourageefficiency, quality and innovation in the delivery of goods andservices.

Advantages of Privatization Privatization helps to reduce the burden on Govt.

I t will help profit making public sector unit tomodernize and diversify their business.

I t will help in making public sector unit morecompetitive.

I t will help to improving the quality of decision making, because the decisions are freefrom any political interference.

Privatization may help in reviving sick units which are the liability of the public sector.

I t Encourage the new innovations without any restrictions.

Industrial growth.

Increase the foreign investment.

Increase in efficiency.

Globalization

• Liberalizing the rules and regulations and by creating favorable socio-economic and political climate for global business.

• Opening and planning to expand business throughout the world.

• Buying and selling goods and services from/to any countries in the world.

It Means that opening up of the economy for foreign direct investment by

Four Parameters of Globalization

Free flow of goods and services

Free flow of capital

Free flow of technology

Free movement of labor

Benefits of Globalization1. Access to new technology

2. Reduction of cost of production

3. Growth opportunity in foreign markets

4. Improvement of competitive strength

5. Satisfaction of consumersBetter quality low price goods

6. Increased volume of trade

7. Spin off benefitsImprove their domestic business as well as image of the countryEarn foreign exchangeImport capital goods and technology

Criticism over Globalization

1. Dumping of hazardous technology

2. Widening of income inequalities among countries

3. Widening of income inequalities within a country

4. Exploitation of resources of developing countries

5. Dependence on the advanced countries

6. Attack on country’s autonomy

ROLE OF CENTRAL BANK (RBI)

MANAGERIAL ECONOMICS FOR TOURISM

ENDTHANK YOU!!!