Economics For Managers

Running head: ECONOMICS FOR MANAGERS
Economics For Managers
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1ECONOMICS FOR MANAGERS
Table of Contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................5
Question a...............................................................................................................................5
Question b..............................................................................................................................6
Question c...............................................................................................................................6
Question 3..................................................................................................................................6
Question 4................................................................................................................................10
Reference list............................................................................................................................13

2ECONOMICS FOR MANAGERS
Question 1
The report summarizes the recent trend in Australian tourism industry. The total
investment projects in Australian tourism during 2016-17 amounts to be $37.8 billion. The
three main subsector of tourism investment are Aviation, Art, Recreation & Business
Services and Accommodation. Investment in the three respective sectors amounts to be $10.1
billion, $17.0 billion and $10.8 billion respectively.
Investment in an economy depends on number of different factors. Economic
performance of a particular industry is one main driver of investment (Bernanke, Antonovics
and Frank 2015). Tourism industry of Australia in recent years constitute a steady
performance. This is reflected from an increase in number of night spent in hotels, motels and
service apartment, inbound airline passengers, domestic flight passengers and total spending
in tourism. The expansion of tourism industry is contributed from an increase in both demand
and supply. Supply has been increased substantially since 2010. The capital cities of
Australia already suffering from high occupancy rate it is not possible to accommodate
increased tourism demand unless increase in room supply (Mankiw 2014). Occupancy rates
in the capital cities like Sydney and Melbourne exceed that of Australia’s total occupancy
rates implying high domestic and tourism demand in capital cities. Based on the occupancy
rates in 2016, the occupancy rates are expected to increase in upcoming years of 2017 and
2018 indicating a consistency in demand and supply condition.
When demand for a product or service increases, then there is an obvious increase in
demand for related goods or services. An increase in number of tourists, there is an obvious
increase in availability of inbound airline seats. This also pulled up demand for night stay in
hotels, motel and other service apartments (Moulin 2014). People visit Australia not only for
recreation purpose, each year many students come in Australia for pursuing higher studies.

3ECONOMICS FOR MANAGERS
With increase in tourism demand, there will be an associated increase in place for the
international students in the educational institutions. The increased demand needs to be
supported by increased supply. Strong investment is required to boost the supply.
The economic condition of Australia plays an important role in attracting visitors in a
nation. Australia is a developed nation that experienced an uninterrupted growth for a
considerable long period. The steady economic growth and other favorable condition in
Australia leads to a significant growth in number of visitors (Cohn 2015). Along with this,
there is a substantial increase in investment in the tourism infrastructure boosting growth of
hotel market. Half of the investment in tourism are financed through foreign funds especially
coming from Chinese investors. In the accommodation market, Sydney and Melbourne
constituted strongest performance in the hotel market. The high tourism demand in Sydney
encouraged new development. The second highest performer in the accommodation market is
Melbourne. The new wave of supply in accommodation market is to be absorbed by the
strong occupancy rate. The decline in mining boom initially had an adverse effect on business
related to mining. With this, the Australian economy faced an initial downturn. The ease of
visa processing and Air Service Agreement increases visitors’ growth from China. The
expansion of demand from both domestic and international visitation indicates tourism is one
of the fastest growing sectors of Australia.
Investment in the accommodation market include both stand-alone accommodation
and mixed use accommodation. The capital cities experienced largest increase in demand for
stand-alone accommodation. Besides capital cities, investments have also increased in
regional areas. Apart from accommodation investment, there has been a shift to the mixed-
use accommodation projects. Mixed used accommodation projects include tourism
accommodation along with other components in non-tourism sector.