Hecon Midterm

tourism sector

provides tourist attractions or recreational activities for tourists

hospitality sector

broad - restaurants, hotels, ect.

travel sector

transportation and travel agencies

Breadth

Supply side, all the different parts

Depth

linkage between supply and demand (travel agencies)

Inbound Tourism

increases GDP (exports)

Outbound Tourism

decreases GDP (imports)

Domestic Tourism

increases GDP (consumption)

Tourist Expenditure Formula

sum of total expenditure during the whole trip

Tourist Departures Formula

number of people living in their own country * frequency of their travel

Direct Effect

tourist’s direct expenditure

Indirect Effect

revenues earned indirectly by tourism industry (manufacturing)

Induced Effect

people who work in hospitality buying things

Estimating price as a function of quantity demanded

y=mx+b or P=aQ+b

Inverse Demand Function

“P=”

Standard Demand Function

“Q=”

Demand Curve shift to the right “up”

increasing

Demand Curve shift to the left “down”

decreasing

When does demand move along the curve

when price changes

Supply curve shift to the left “up”

increasing

Supply Curve shift right “down”

decreasing

supply and demand change formula

final - initial

When does supply move along the curve

when price changes

CS Formula

willingness to pay - market price

PS Formula

market price - willingness to pay

SS Formula

CS + PS

Price Ceiling

price of a good fixed at level lower than equilibrium price

Price Ceiling Example

rent control - shortage in supply and surplus in demand

Shortage Quantity Formula

price ceiling - equilibrium q

Price Floor

price that is higher than equilibrium price

Price Floor Example

minimum wage - surplus in supply, shortage in demand

Surge: increase in transactions because surge formula

Q1 - Q0

Size of Surge formula

Q2-Q0

Surge: decrease in demand because of surge prices

Q2-Q1

Surge multiplier

new surge rate/normal rate

Surge price fail multiplier

1

Surge Price Fail: shortage of supply

Q2 - Q0

Surge Price Fail: increase that would have happened if no glitch

Q1-Q0

Surge Price Fail: Q that would have happened if no glitch

Q2-Q1

Product Boundary Increases

market share becomes smaller

Geographic Boundary

different locations so limited competition

Most competitive

Perfect Competition

Least Competitive

Monopoly

Least Concentrated

Perfect Competition

Most Concentrated

Monopoly

CR4 Formula

sum of the % of market share of 4 largest firms

HHI formula

sum of the (% of market share w/o symbol)² of 50 largest firms

marginal product of labor formula

change of output/change of quantity of labor

When is total output maximized

when mpl = 0

Total Revenue Formula

TR = P * Q

Average Revenue Formula

AR = TR/Q

Marginal Revenue Formula

derivative of TR

Total Cost Formula

FC + VC

Average Cost Formula

TC/Q

Marginal Cost Formula

derivative of total cost

How to find variable cost curve

swap p and q of the production function

Average Fixed Costs Formula

AFC = FC/q

Average Variable Costs Formula

AVC/q

Average Total Cost

ATC = (FC+VC)/q

when is profit positive

MC=MR=Price > ATC

0 profit

MC=P=MR is equilibrium or < AVC (shut down)

Negative Profit

P=MC=MR < ATC or equilibrium with AVC or AVC<MC<ATC

Where is the Break-even point

R=C

When can a monopoly supply any quantity?

Willingness to pay is above MC

Price Discrimination

pricing strategy where firm charges more than one price for the same product

3rd Degree Price Discrimination

different prices for different consumer segments

2nd Degree price Discrimination

different prices for different blocks of sale

1st Degree Price Discrimination

Charges each consumer a distinct price (market demand) —> market is perfectly efficient

MR Function Formula

MR = 2aQ+b

PS, CS, and SS in 3rd and 2nd Degree Discrimination

increase

1st Degree Price Discrimination price range for “auction”

lowest price = MC and highest price = highest willingness to pay

PS and SS in 1st Degree

maximized

CS in 1st degree

0

Supply in lodging Sector

number of room days available (stock)

Demand in lodging sector

number of room days sold (equilibrium quantity)

peak season supply

demand shifts right

off season supply

q shift left

monopoly profit formula

(P-C)*Q