(i) To develop and apply the introductory concepts taught in the weekly lectures
(ii)To discuss and prepare the five tasks which are required for assessment.
In order to ensure you are familiar with what is required for (ii) above, you will need to spend some time, usually 1-2 hours, before
each tutorial researching the topic and preparing some of the answers to the various tasks.
For each of the tasks, your portfolio should contain answers to all of the questions listed. You should also include any appended
material that might be appropriate to the task. This material must be properly and fully referenced.
Tutorial 1
I. What is Economics?
Exercise 1: Which of the 10 principles of economics discussed in class are “macro principles”?
Exercise 2: Define the following concepts: opportunity cost, efficiency and equity.
Exercise 3: Suppose you own a building in Manchester that you use to run a small pizzeria. Food supplies are your only accounting
costs. At the end of the year, your accountant informs you that these costs were £20,000 and that your revenues were £100,000.
(i) What is your accounting profit?
(ii) What is the opportunity cost of running the pizzeria?
Advantages of specialization, interdependence, self-interest, and division of labour
Exercise 4: Read the text below and answer the following questions
When we do what is best for ourselves, we often end up doing what is best for society, as if guided by market forces—or an invisible
hand. Further, we make our decisions about economic activities using price information prevailing in the markets. If for example the
price of a garment decreases, those who produce garments will be motivated by self-interest to produce some other commodities where
there can make a larger profit. That would lead to a decrease in supply of garment and then the market price will rise again. If the
market price of the garment increased instead, those people with capital and labour will move their resources into producing that
garment in order to make higher profit and wage. Wages, profits, and rents give people the incentive to perform these varied tasks. We
depend on thousands of people we don’t know, won’t see, and don’t think of in order to get dressed each morning. We depend on them to
dress us and they depend on our purchases for their incomes.
In answering these questions think of the importance of market, production and distribution.
(i) Where did your clothes come from?
(ii) Who worked to produce your clothes?
(iii) What things do you consider when buying a garment?
(iv) Where were your clothes produced (what countries)?
Exercise 5: What role do households play in the functioning of a competitive market?
Tutorial 2
II. The Market Forces of Demand and Supply
Exercise 1:
(i) Economic theory suggests that price and tourism supply should have a positive relationship. Briefly explain why.
(ii) List the key non-price factors that might influence tourism supply in a destination of your choice.
(iii)What is derived demand?
(iv)Using evidence from the “National Travel Survey: England 2013”, explain why demand for transport can be said to be a ‘derived’
demand and list the key factors that might influence the demand for transport.
Tutorial 3
III. Elasticity and Its Applications
Exercise 1: Define the following concept: price elasticity of demand, income elasticity of demand, cross-price elasticity of demand and
total revenue.
Exercise 2: Discuss the benefits and potential pitfalls of the following National Rail profit strategies for Huddersfield-London
market:
– Increasing fares
– Cutting fares
(i) Which strategy would be favourable for the National Rail for the above market with Price Elasticity of demand of -0.8? Explain?
(ii) Which strategy would be favourable for the National Rail for the above market with Price Elasticity of demand of -1.2? Explain?
Exercise 3: The income elasticity of demand for your firm’s product is estimated to be 0.75. A recent report in The Wall Street Journal
says that national income is expected to decline by 3 per cent this year.
(i) What should you do with your stock of inventories?
(ii) What do you expect to happen to your sales?
(iii) How would you answer parts (i) and (ii) if you expected a 5 per cent increase in income instead of a decrease?
Tutorial 4
IV. Market Structure
Exercise 1: Fill in the table below that compares the characteristics of the different market structures and provide some tourism
examples.
Market structures and their characteristics
Perfect competition Monopolistic competition Oligopoly Monopoly
Number and
size of firms
Degree of substitutability of products
Does the individual firm set its own price?
Barriers to entry
Tourism examples
Exercise 2: define the following concepts and give an example illustrating each of them: vertical integration and horizontal
integration.
Tutorial 5
V. Market Failure and Government Intervention
Exercise 1: What are the main causes of market failure?
Exercise 2: Explain the difference between private and public goods.
Exercise 3: The price of air travel
To economists, the ever-increasing demand for air transport generates a whole range of negatives externalities which impose costs on
third parties. It is the role of the economist to try and quantify these costs and to make recommendations as to how governments might
tackle these externalities.
The most common method is to increase taxation on air travel.
Before the tutorial
(i) Obtain information on the current level of Air Passenger Duty (APD) and summarise some of the arguments for and against this
indirect tax.
In the tutorial – be prepared to
(ii) Offer a critique of the current APD system.
(iii) Discuss alternative ways of solving the market failures arising from negative externalities of increased air transport.
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