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162 economics
economic linkages, leakages and multiplier effects
associated with an economy. Of particular concern
at the macroeconomic level is the degree of
dependence that an economy may have on tourism
activity �see dependency theory).
Second, microeconomics focuses upon the
activities of businesses or individuals within a
national, regional or local economy. Here the
study of the allocation of resources can be
examined with a view to estimating profitability
for businesses, optimum production levels and
economic responses to different market structures.
The theory of the firm and the study of
monopolistic markets, perfect markets and imperfect
markets all carry with them implications for
tourism business behaviour and the price elasticity
of demand. Microeconomics is also concerned with
matters such as production functions, which
describes how businesses produce their output
from sets of resources. The existence of economies
of large-scale production is evident in many of the
industries involved in the delivery of the tourism
product such as airlines, cruise lines and hotels. At
the consumer level, economic decisions can be
examined in order establish behavioural responses
to price and income level changes and the study of
consumer choice and welfare.
Third, regional economics relates to the study of
subnational economic systems, such as counties or
states. It is similar in structure and framework to
macroeconomics, but its study is burdened by the
absence of sets of local `national accounts'. This
lack of secondary data tends to require economists
to utilise alternative models to test their hypotheses.
The lack of local secondary data often results
in the need for extensive fieldwork and primary
data collection. At the macroeconomic level,
tourism activity is often judged by its performance
as a means of generating foreign exchange,
whereas at the regional level it is often seen as a
vehicle for redressing economic imbalances within
a national economy, by creating income and
employment opportunities in areas where they
would not otherwise exist. Because of the spatial
dimension relating to regional economics, the topic
of location theory and its implications for business
and resort development can be included under
this heading. The tendency for tourism development
to occur in resorts or clusters in many
destinations makes regional economics a particularly
pertinent area of study.
Fourth, development economics is the study of
the performance of the system in achieving
accepted economic and welfare goals. Given the
fact that the economic benefits associated with
tourism development are one of its most significant
stimulators, it is an important aspect of the
economics of tourism. This industry can be chosen
as a catalyst for general economic development
for a variety of reasons. Unlike many primary
goods, the international price of the tourism
product is not determined by international commodity
markets. Even though tourism may often
be regarded as being highly competitive and price
sensitive, there is still some room for product
differentiation and price determination.
Furthermore, because tourism is a multi-sector
product, it involves a wide spectrum of industries
and the development of these sectors, and their role
in achieving general economic development is an
area of study.
Fifth, international economics is largely concerned
with the flow of trade and services between
economies and the competitive and comparative
advantages that may be associated with such trade.
International tourism expenditure may be seen
as an export of goods and services by the receiving
destination. On the other hand, domestic tourism
may, under certain circumstances, be seen as
an import substitution activity if, in so doing, it
dissuades consumers from spending money in
destinations located outside the domestic economy.
Sixth, industrial economics is concerned with
such matters as agglomeration theory and the
concentration of activities within an industry. The
study of macroeconomics relating to tourism issues
is well established as an area of research and has
been central to much of the impact analysis studies
that have taken place. From a microeconomic
point of view, there are several areas that have
attracted international attention, such as the
existence of economies of large-scale production,
demand theory and price elasticity of tourism
destinations, the effectiveness of fiscal incentives as
a means to securing investment in tourism, and
so on.
Seventh, public sector economics encompasses
the fiscal and expenditure activities of central and