This document discusses the economics of tourism. It begins by defining economics and outlining some key economic concepts. It then describes the scope of economics, including microeconomics, macroeconomics, international economics, and other branches. The document outlines the methodology used in economics, including deductive and inductive methods. It then discusses the relationship between economics and tourism, defining tourism supply and the factors that affect it. Finally, it outlines the components of tourism supply and discusses tourism destination planning.

1. ECONOMICS OF TOURISM

2. ECONOMICS
 The word Economics is derived from the Greek word “OKIOS NEMEIN”
meaning household management
 Man is a bundle of desires. Goods and services satisfy these wants. But
almost all the goods are scares
 To produce goods factors of production are needed and these are all scarce
 ECONIMICS is the branch of knowledge concerned with the production
consumption and transfer of wealth.
 Economics – the study of how individuals and societies make decisions
about ways to use scarce resources to fulfill wants and needs.

3. SCOPE OF ECONOMICS
 The horizon of economics is gradually expanding. It is no more a branch of
knowledge that deals only with the production and consumption. However,
the basic thrust still remains on using the available resources efficiently while
giving the maximum satisfaction or welfare to the people on a sustainable
basis. Given this, we can list some of the major branches of economics as
under:
1. Microeconomics: This is considered to be the basic economics.
Microeconomics may be defined as that branch of economic analysis which
studies the economic behaviour of the individual unit, may be a person, a
particular household, or a particular firm. It is a study of one particular unit
rather than all the units combined together. The microeconomics is also
described as price and value theory, the theory of the household, the firm
and the industry. Most production and welfare theories are of the
microeconomics variety.

4. 2. Macroeconomics: Macroeconomics may be defined as that branch of economic
analysis which studies behaviour of not one particular unit, but of all the units
combined together. Macroeconomics is a study in aggregates. Hence it is often
called Aggregative Economics. It is, indeed, a realistic method of economic
analysis, though it is complicated and involves the use of higher mathematics. In
this method, we study how the equilibrium in the economy is reached
consequent upon changes in the macro-variables and aggregates.
3. International economics: As the countries of the modern world are realising the
significance of trade with other countries, the role of international economics is
getting more and more significant nowadays.
4. Public finance: The great depression of the 1930s led to the realisation of the
role of government in stabilising the economic growth besides other objectives
like growth, redistribution of income, etc. Therefore, a full branch of economics
known as Public Finance or the fiscal economics has emerged to analyse the
role of government in the economy. Earlier the classical economists believed in
the laissez faire economy ruling out role of the government in economic issues.
5. Development economics: As after the second world war many countries got
freedom from the colonial rule, their economics required different treatment for
growth and development. This branch developed as development economics.

5. 6. Health economics: A new realisation has emerged from human
development for economic growth. Therefore, branches like health
economics are gaining momentum. Similarly, educational economics is
also coming up.
7. Environmental economics: Unchecked emphasis on economic growth
without caring for natural resources and ecological balance, now, economic
growth is facing a new challenge from the environmental side. Therefore,
Environmental Economics has emerged as one of the major branches of
economics that is considered significant for sustainable development.
8. Urban and rural economics: Role of location is quite important for
economic attainments. There is also much debate on urban-rural divide.
Therefore, economists have realised that there should be specific focus on
urban areas and rural areas. Therefore, there is expansion of branches like
urban economics and rural economics. Similarly, regional economics is
also being emphasised to meet the challenge of geographical inequalities.
There are many other branches of economics that form the scope of
economics. There are welfare economics, monetary economics, energy
economics, transport economics, demography, labour economics,
agricultural economics, gender economics, economic planning, economics
of infrastructure, etc.

6. METHODOLOGY OF ECONOMICS
 Economics is also like a science but it is a social science. It deals
mainly with the human behaviour. Therefore, many economists argue
that economics can not be as precise a science as the natural
sciences like physics, chemistry etc. The latter can be studied in the
laboratory conditions where variables can be easily controlled during
experiments. However, social sciences like economics can not be
easily controlled. Still over a period of time economic sciences have
gained maturity to develop its methodology which is proving now to
be quite efficient and such methodologies can be used for efficient
analysis of the economic relationships and predictions can be made
with sufficient accuracy that generate a sense of confidence and
faith. There are two broad methods used in the economic sciences.
1. The deductive method
2. The inductive method

7. 1. The deductive method: This method involves going from general to
particular. Certain hypotheses or postulates regarding human behaviour are
taken to be true and then with the help of logical reasoning and
examination, we try to figure out the cause and effect relationship between
the factors under consideration.
2. The inductive method: Although deductive method has strong points of
merit to depend upon, this methodology seems to suffer from certain
weaknesses. Therefore, economists belonging to the historical school and
many other economists have favoured the inductive or empirical method.
The method of induction involves going from particular to general. Here the
appeal is to facts, rather than reasoning and an attempt is made to arrive at
conclusions from the known facts of actual life.

8. RELATIONSHIP BETWEEN ECONOMICS AND
TOURISM

9. TOURISM SUPPLY
Tourism supply is a composite product involving
transport, accommodation, catering, natural resources,
entertainment, and other facilities and services, such as
shops and banks, travel agents and tour operators.

10. FACTORS AFFECTING TOURISM
SUPPLY
1. Economic
2. Political
3. Geographical
4. Legal
5. Technological
6. Social

11. Tourism Product
TransportTourists Area of
Origin
Tourists Destination
Tourists Demand
Product
Package Supplier
Associated Services
Government NGOs
Tourism
Operators
Services Tour Guides
+ Drivers
ACCOMMODATION
Components of Tourism Supply (supply chain)

12. SUPPLY COMPONENTS
 Natural or environmental resources
(physiographic of the area, landforms,
flora, fauna, water bodies, air quality and
similar natural phenomena)
 Built or man-made resources (infrastructure,
superstructure)
 Transportation
 Hospitality and cultural resources (friendliness,
courtesy, sincere interest and willingness
to serve and to be better acquainted with
visitors)

13. DEMAND-SUPPLY LINK
Demand
Generating Origin
Supply Receiving
Destination
Marketing and Promotion

14. TOURISM DESTINATION PLANNING
 The availability of natural resources and
attractions
 The availability of investment funds
 A skilled human resource base
 Government policy that supports tourism
 Destination accessibility
 The presence of complementary services and
facilities and infrastructure