Chapter 4 Further Issues of Demand and Supply Further Issues of
Demand and Supply 2012 Taylor & Francis
Slide 3
Learning Outcomes By the end of this section students will be
able to: evaluate the work/leisure trade-off evaluate the notion of
a leisure society understand and apply the concept of price
elasticity of demand understand and apply the concept of income
elasticity of demand understand and apply the concept of cross
price elasticity of demand describe simple methods of demand
forecasting evaluate techniques of demand forecasting By the end of
this section students will be able to: evaluate the work/leisure
trade-off evaluate the notion of a leisure society understand and
apply the concept of price elasticity of demand understand and
apply the concept of income elasticity of demand understand and
apply the concept of cross price elasticity of demand describe
simple methods of demand forecasting evaluate techniques of demand
forecasting 2012 Taylor & Francis
Slide 4
Slide 5
The demand for leisure Two potential effects of an increase in
income on the demand for leisure time: The substitution effect:
First, an increase in income means an increase in the opportunity
cost of leisure time. In this case we may expect consumers to
demand less leisure time. The income effect: Leisure time can be
classed as a normal service, and in common with other normal goods
and services, as income increases more will be demanded. Choice or
rigidity? 2012 Taylor & Francis
Slide 6
Trends in work and leisure: A leisure society? Joffre
Dumazedier (1967): The Leisure Society Have we become a Leisure
Society? Space Tourism 2012 Taylor & Francis
Slide 7
A leisure society? Certainly in the developed world the
opportunities for leisure have never been better, fuelled by rising
incomes, technological advances and a dazzling array of new
products. 2012 Taylor & Francis
Slide 8
A leisure society? But there are several paradoxes surrounding
the Leisure Society. The first concerns leisure as a social
activity The cinema at least provides an opportunity for social
interaction in leisure. But there are also signs of a retreat from
leisure as a social activity to that of a solitary one. 2012 Taylor
& Francis
Slide 9
A leisure society? A Leisure Society also suggests leisure for
all but First there is that of involuntary leisure. Unemployment
has remained obstinately high in many parts of Europe. Second for
large populations in many parts of the world, working conditions
are harsh, pay is low and paid holidays are uncommon. 2012 Taylor
& Francis
Slide 10
A leisure society? Money rich, time poor The Overworked
American. TINS (Two Incomes No Sex) 2012 Taylor & Francis
Slide 11
A leisure society? Steady increase of working women Linders
(1970) The Harried Leisure Class Homogenisation of leisure Do not
appear to be a Society at Leisure Work remarkably hard but now play
hard too. 2012 Taylor & Francis
Slide 12
Price elasticity of demand Definition: Percentage change in
quantity demanded Percentage change in price 2012 Taylor &
Francis
Slide 13
Slide 14
Price elasticity of demand Factors affecting price elasticity
of demand necessity of good or service number of substitutes
addictiveness price and usefulness time period consumer awareness
Elasticity of demand and total revenue 2012 Taylor &
Francis
Slide 15
Price elasticity of demand Which of these would you expect to
demonstrate more inelastic demand? RipCurl (name brand, few close
substitutes) whereas many substitutes for AVIS car hire 2012 Taylor
& Francis
Slide 16
Income elasticity of demand Definition Percentage change in
quantity demanded Percentage change in income Calculation of income
elasticity of demand enables an organization to determine whether
its goods and services are normal or inferior 2012 Taylor &
Francis
Slide 17
Income elasticity of demand The Hotel Biltmore, Bondi Beach,
NSW LA Fitness UK Health Club Which of these has positive and which
negative income elasticity of demand? LAF = Positive Biltmore =
Negative 2012 Taylor & Francis
Slide 18
Cross-price elasticity of demand Definition Percentage change
in quantity demanded of good A Percentage change in price of good B
Cross-price elasticity of demand measures the relationship between
different goods and services. It therefore reveals whether goods
are substitutes, complements or unrelated 2012 Taylor &
Francis
Slide 19
Demand forecasting Methods for forecasting demand (Frechtling,
2001) include: naive forecasting qualitative forecasts time-series
extrapolation surveys Delphi technique models 2012 Taylor &
Francis
Slide 20
Review of key terms Income effect change in demand caused by
change in income. Substitution effect change in demand caused by
change in relative prices. Price elasticity of demand the
responsiveness of demand to a change in price. Inelastic demand
demand is unresponsive to a change in price. Elastic demand demand
is responsive to a change in price. Income elasticity of demand the
responsiveness of demand to a change in income. 2012 Taylor &
Francis
Slide 21
Review of key terms Cross-price elasticity of demand the
responsiveness of demand for one good to a change in the price of
another good. Time series a set of data collected regularly over a
period of time. Seasonal variation regular pattern of demand
changes apparent at different times of year. Extrapolation
extending time-series data into the future based on trend. Delphi
technique finding consensus view of experts. 2012 Taylor &
Francis