Developmental Economics - Essay Example

? DEVELOPMENTAL ECONOMICS Case study questions and answers …………………. College/ ………….. …………. Answer According to the basic economic concepts, consumer income and price of the goods or services are the very significant factors that determine the demand in the market. Consumers’ spending on several different goods or services has been found to be the significant factor that affects consumers’ decision to buy a particular goods or service. Dougan’s (2007, p. 86) study of “ Analysis of Japanese Tourist Demand to Guam” has highlighted the fact that the Japanese consumers’ spending was the most significant factor behind the decrease in visits to Guam as it has affected their decision to travel to Guam. Economists assume that price is the most important influence on the amounts of any products or services purchased. Apart from price, economists explained that there are many other factors like consumers’ taste, numbers of consumers in the market, consumers’ income, price of related goods etc that also influence the amounts of goods or services purchased (McConnell and Brue, 2004, p. 42- 43). These factors are generally referred as determinants of demand. A person’s taste, preferences and opinions of the product or service consumed are some of the basic determinants of how much a consumer buys them. At higher price of the product or service, the consumer generally economizes and reduces quantity purchased. Similarly, as consumers’ income increases, the consumer is generally found to be buying more of many products and services in the market (Pugel, 2003, p. 19). When it comes to the case of tourism of Guam, 85% of the total tourists are from Japan and the numbers of visits to Guam from Japan have been decreased in recent years. Demand for tourism can also be a function of consumers’ income, price of the service or price of competing goods. Marketing expenditures and exchange rate have been found to be very evident determinants of demand for tourism. Guam has been selected for tourism by Japanese mainly due to its proximity to Japan, beautiful beaches and safety in Guam as well. A research has highlighted that existence of tourism development office or availability of tourism improvement activities can have greater impacts on increasing the tourism to a particular destination (Dougan, 2007, p. 81). As far as consumers’ income is considered to be a main determinant of the tourism to Guam, the price of tourism in relation to three different components are to be analyzed. These three components are cost of transportation, living cost in Guam and exchange rate. When more consumers are to travel to Guam, their relative spending on transportation and living would likely to increase. Similarly, they may have to spend more on exchanging currency too. In order to attract more customers to Guam and increase travelling to Guam, it is recommended that cost of transportation between Guam and Japan must be discounted or the government has to promote tourism through some seasonal programs. As a government policy maker, it is also recommended that cost of living, especially for those who visit Guam from Japan has to be adjusted in order to attract more visitors from Japan. If government fixes a specific fixed exchange rate between US Dollar and Japan’s Yen for the Japanese travelers to Guam, the expenditure issues that Japanese concern in relation to the exchange rate can also be solved and thus to increase numbers of travelers from Japan to Guam. A number of political and social factors have also caused decrease in travelling to Guam. The downward trend in Guam’s tourism has been caused by Japan’s sluggish economy and some political events like Gulf War in 1991, Typhoon Omar and Earthquake rated 8.1 in 1993, Korean airline crash in 1997, Asian crisis in 1998 etc (Dougan, 2007, p. 80). Japanese were choosing Guam for tourism for several reasons like beautiful beaches and safety in Guam. Safety in beaches, resorts and hotels should be improved so that customers from Japan will be more satisfied. If the safety provided in Guam is perfect and is likely to save people from natural calamities like earthquake, more customers would tend to choose Guam. Improving operational efficiency is an evident determinant that influences demand for tourism. Guam government has to take measures to increase the operational efficiency by ensuring more safety and availability of proper tourism services to the customers. From the economic analysis, it can be understood that concessions in room rates, hotel expenditures and cheap luxury facilities can increase the numbers of tourists to Guam. Answer- 2 Tourism has recently been recognized and developed as an important source of social and economic development, mainly as a legitimate and effective tool for poverty reduction (United Nations, 2003, p. p. 35). WTO has given greater emphasis on ‘Tourism to alleviate poverty’ and launched publication with its recommendations in 2002 and 2004. It has also formed a foundation called Sustainable Tourism- Eliminating Poverty (ST-EP) and it is now developing its projects in many developing countries. WTO has brought this attention with a view that tourism can be an effective tool to alleviate poverty in many countries (Mitchell and Ashley, 2010, p. 5). According to the very basic concept of developmental economics, development is a process that improves living conditions by increasing people’s wealth and also by improving human and institutional change (McCool and Moisey, 2008, p. 197). Growth or development enables society to improve nation’s infrastructure and enhance better care of the sick and elderly. It also helps a nation provide greater access for the disabled and poor who suffer from disease and are less-accessed to health and other care. Economic growth and development are the more direct ways and realistic approaches to reduce poverty (McConnell and Brue, 2004, p. 132). Development helps alleviate poverty. Therefore, development in tourism can certainly alleviate poverty. This has been the basic concept and theoretical framework behind WTO’s emphasis on ‘tourism for alleviating poverty’. To be more specific, tourism itself is a development and with it or by developing the tourism, poverty can be reduced. Many countries have opened its boarder to large multinational companies and facilitated tourism as part of this project. Philippine was one of such examples. But, various studies show that tourism has made bigger gap between wealthy and poor, and extended inequalities between rich and poor, developed and undeveloped countries. Lumang’s (2008) study described that tourism, but instead, has helped rich to gain more and poor to loose more. Tourism can be an effective tool for alleviating poverty in developing countries due to that a) Tourism is relatively labor intensive, b) it can employ high proportion of women, c) it can be developed in remote areas, and d) it has minimal trade barriers. As Haven-Tang (2005, p. 60) noted, in order tourism to be an effective tool to reduce poverty, tourism must have higher potential for linkage with local enterprises and tourism products must be built on the local resources that poor have. But, in most developing countries, the tourism efforts from their governments provided open and wider opportunities to Transnational Corporations to earn more. Lumang (2008) pointed that Transnational Companies are the ones who benefit from the tourism in Philippines. Poor people and marginalized sectors in Philippines are those who bear the costs of the tourism. A large number of people in Philippines have lost their livelihood resulting from agricultural lands for land reform. Large spaces of agricultural lands and fishing areas have been handed over to tourism companies and poor people lost their basic fishing and agricultural works. This is how tourism has affected poor people to loose more rather than alleviating the poverty in Philippines as well as in other developing countries. Due to eco-tourism, indigenous population dispossessed from the ancestral lands and caused major destruction of the marine, forest and mountain wildlife habitat. As some people have got poor income from upland farming, they turned to tourism-oriented activities such as weaving handicraft and woodcarving and these caused them to loose their indigenous cultivation activities. As tourism impacted the prices of major goods and services in Philippines, the prices of medicine and health services also became highly expensive and thus unaffordable to poor Philippines (Lumang, 2008). Development impositions on the lives of poor people and their resources should be rejected in order the tourism not to be exploitative and oppressive. In any efforts to make tourism an effective poverty alleviating tool, the emphasis must not only be to achieve tourism growth and to increase tourism revenues, but also to ensure that there are more realistic approaches and effective strategies for linking tourism revenues and receipts to local communities and poor people to achieve poverty alleviation goal. References Dougan, JW 2007, Analysis of Japanese Tourist Demand to Guam, Asia Pacific Journal of Tourism Research, Vol. 12, No. 2, Routledge Haven-Tang, C 2005, Tourism SMEs, service quality, and destination competitiveness, Illustrated edition, CABI Lumang, J, 2008, Tourism as a development strategy: Is it the right way to progress?, Contours McConnell, CR and Brue, SL 2004, Economics- Principles, Problems and Policies, Sixteenth Edition, The McGraw Hill Companies McCool, SF and Moisey, RN 2008, Tourism, recreation, and sustainability: linking culture and the environment, Illustrated second edition, CABI Mitchell, J and Ashley, C 2010, Tourism and poverty reduction: pathways to prosperity, Illustrated edition, Earthscan Pugel, TA 2003, International Economics, Twelfth Edition, The McGraw Hill Companies United Nations, 2003, Poverty alleviation through sustainable tourism development, United Nations Publications, Read More