Skip to main content

INTRODUCTION TO HOSPITALITY ECONOMICS

What is Hospitality Economics?

Hospitality Economics is a branch of Micro-Economics that focuses on the general economic behavior of the Hospitality Industry.
Hospitality Industry as defined by Wikipedia https://en.wikipedia.org/wiki/Hospitality_industry is comprised of various sectors such as restaurants,hotels,resorts,amusement parks etc.
Economics in simple terms is basically the study of how scarce resources are used and allocated by the humankind in efforts to satisfy the unlimited needs and wants.
Economics as a field of study is divided into two branches;
  1. Micro Economics
  2. Macro Economics
Micro Economics
This branch of Economics involves the study of the behavior of individual Economic Units.In our case we focus on the Hospitality Economic Unit.
Macro Economics
Focus here is on the entire Economic System Issues such as Inflation,Employment,Imports,Exports etc.
Economists over the years have developed two main approaches or methodologies used in the study of economics.These are;
  1. Positive Methodology
  2. Normative Methodology
Positive Methodology
This is an approach that is objective in nature making use of scientific data and facts to test hypothesis and explain issues.
Normative Methodology
As an approach,Normative Methodology is subjective in nature .Involves the use of  logical/theoretical suggestions,standards and norms to explain how economic goals and objectives of various economic units can be  realized.
In efforts by Mankind to allocate scarce resources to meet unlimited needs and wants,some needs are forgone in favor of others/alternatives.This brings on board the concept of Opportunity Cost employed by Mankind in allocation of scarce resources.
Opportunity Cost
Simply it is the value of the best forgone alternative action which occurs due to scarcity of resources.If costs are expressed in terms of  the best forgone combination of alternatives,then that is opportunity cost.
                                                                                                                                                

Comments

Post a Comment

Popular posts from this blog

THE PRODUCTION POSSIBILITY CURVE (PPC) IN HOSPITALITY INDUSTRY

The Production Possibility Curve also known as Production Possibility Frontier (PPF) is a concave line to the origin of a two axes (X & Y at 90 degrees) diagram. It indicates maximum output combinations of two products (goods and services) that an economy is capable of achieving when all resources are fully and efficiently utilized. Resources used in production are limited and scarce which means that an economy would choose to reallocate resources from one product to another to achieve the set output targets. This is the concept of Opportunity Cost. Production Possibility Curve is also commonly known as Production Possibility Frontier (PPF) or the Transformation Curve. PPF applicability in the Hospitality Industry is to definitely assist managers and owners to determine the best combination of products that can be efficiently produced using the available resources. The basic assumption is that technology and all other factors remain constant so managers and decision
Post a Comment
Read more

THE PPF AND PARETO EFFICIENCY IN HOSPITALITY INDUSTRY

THE PPC AND PARETO EFFICIENCY IN HOSPITALITY INDUSTRY Named after the Italian Economist Vilfredo Pareto,Pareto Efficiency is used to evaluate the efficiency of a product resources allocation on the PPC. Any output combinations for the two products X and Y lying inside the PPC eg Points D ,E and F inefficient because they are below the possible maximum attainable output. The possible maximum attainable output combinations for the two products lie on the PPC. eg. Points A,B and C represent output combination points where resources available are fully and effectively employed in production. Output Levels outside the PPC are considered to be beyond the reach of the company and unattainable using the currently available resources. In Hospitality Sector lets say a Restaurant,new and improved technology deployment would push production outside the PPC.  Staff Training and Consultancy  to boost the  productivity  of the  labor factor  can push the output outside the curve. More outpu
Post a Comment
Read more

ECONOMIC SYSTEMS IN HOSPITALITY INDUSTRY

    ECONOMIC SYSTEMS IN HOSPITALITY The hospitality sector is always thriving and robust regardless of the type of an economic system it's operating in. An economic system refers to the specific way a community,country and government has organized its distribution of the key factors of production mainly  labour,physical resources like land,capital,Information and technology,Entrepreneurs etc.  Despite the unique challenges that each economic system has,the hospitality industry always finds a way to adapt and serve its customers and attract more.    There are four most common economic systems practiced by different communities,states and communities around the world.These four are:         a)Capitalism                                                          b)Socialism        c)Mixed System                                                    d)Subsistence/Traditional Capitalism Capitalism is also called free market system.Found in first world democracies such as the unit
Post a Comment
Read more