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4 Demand for leisure, elasticity and forecasting

4 Demand for leisure, elasticity and forecasting. Learning outcomes. By studying 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

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4 Demand for leisure, elasticity and forecasting

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  1. 4 Demand for leisure, elasticity and forecasting

  2. Learning outcomes By studying 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

  3. 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?

  4. Trends in work and leisure: A leisure society? • Joffre Dumazedier (1967): The Leisure Society • Have we become a Leisure Society? • Space Tourism

  5. 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.

  6. 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. • Danni's Hard Drive (a porn website) had a gross turnover of $3.5 millions in 1998 and 5 million hits per day.)

  7. 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.

  8. A leisure society? • "money rich, time poor" • The Overworked American. • TINS (Two Incomes No Sex)

  9. A leisure society? • steady increase of working women • Linder’s (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.

  10. Price elasticity of demand • Definition: Percentage change in quantity demanded ÷ Percentage change in price

  11. 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

  12. 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

  13. 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.

  14. 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

  15. 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.

  16. Demand forecasting • Methods for forecasting demand (Frechtling, 2001) include: • naive forecasting • qualitative forecasts • time-series extrapolation • surveys • Delphi technique • models

  17. 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.

  18. 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.

  19. 4 Demand for leisure, elasticity and forecasting: The End

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