How does tourism affect circular flow in an economy?
December 292009
I’m under the impression that an economy that did not previously have an international sector would develop one as a result of tourism. Because aren’t tourists considered an import? I just need help understanding how adding tourism to an economy changes the overall circular flow of the economy.
Okay, the tourism acting as more of an export than a import makes sense. And arin, I live in Seminole about 10 min from Treasure Island so it was cool that you could bring the concept home for me.
CIRCULAR FLOW: Foreign tourists spend money and that money generates higher incomes, which is then spent by individuals on more products and services, meaning more income for businesses, meaning higher incomes, etc.
IMPORTS? Tourism money acts more like exports than imports, since a country is selling its resources (natural beauty) and services (hotels, restaurants) in return for foreign money.
December 29th, 2009 at 8:39 pm
Localities compete for tourist dollars so projects may be approved to improve land for the purpose of attracting tourism. Tax rates may be lowered to attract companies that provide tourist services (like hotels, car rental companies, restaurants, amusement parks….etc)
Orlando, FL is a prime example. Before Disney, Orlando was just another small city in central Florida. Now it is a huge tourist hub rivaled only by Vegas in attracting dollars
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December 29th, 2009 at 9:13 pm
Personally, I think tourism is more like exporting. you get money coming in from another region, then it circulates throughout your area. Does that make sense? when you export goods, you get the money for it and it becomes part of your local economy, same with the money spent from tourists. money comes in, not going out.
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December 29th, 2009 at 9:45 pm
When you travel you are giving your money to that particular area that you are visiting as well as the airport, train station, food restaurants, hotels, entertainment. Also, if you are traveling out of an area, that area is loosing money.
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December 29th, 2009 at 10:26 pm
CIRCULAR FLOW: Foreign tourists spend money and that money generates higher incomes, which is then spent by individuals on more products and services, meaning more income for businesses, meaning higher incomes, etc.
IMPORTS? Tourism money acts more like exports than imports, since a country is selling its resources (natural beauty) and services (hotels, restaurants) in return for foreign money.
References :
December 29th, 2009 at 11:12 pm
I live in Treasure Island FL and work in the hospitality Industry so tourism is something I see firsthand every day the effect on the economy is thus. Tourist lands pays cab driver to get to the hotel, tips bell hop, goes out to eat, tips waiter, goes shopping spends money. All of which allows the cab, bell hop, waiter to spend money and further stimulate the economy. It also allows the restaurant, hotel, stores to pay their employees the employees pay their bills and buy things and then everybody pay taxes.
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