Fundamental Economic Problem

Topics: Supply and demand, Customer, Economics Pages: 4 (1027 words) Published: November 17, 2010
This essay will explain the fundamental economic problem in Hospitality Industry at Restaurant Sector. It will also discuss about the determinant of demand and supply in Restaurants.

The central economic problem is scarcity. This problem applies around the world. According to Sloman, Norris & Garratt (2010, p.5) “scarcity is the excess of human wants over what can actually be produced to fulfil these wants”. It means human wants are virtually limited. Every country can only produce limited quantity goods and service. Human demand a lot of things that is very limited to supply. With the factors of production, we can limit the good and service human wants. Labour is a human form contribution that can be restricted in number and skills. Land and raw material is a contribution that nature provides. For example, land and water. Capital is contribution that has been created in the first place. For example, machines, computer, other equipment. Capital is state of technology that is very limited or restricted.

There are six determinants of demands. Taste is the first determinant of demand. Taste is described as advertising, observing other consumers and their experiences with their goods and services. For example, Crown Conservatory is an elegant and relaxing place to dine any time of the day with their luxury buffet style and good customer service. With middle and high income tourists will have higher demand because they would like to experience the widely range of tasty and creative buffet dishes and the staff great customer service. On the other hand, if there is a rumour about Crown Conservatory for don’t have enough buffet dishes and inappropriate customer service, the number of tourist would not reserve on their restaurant.

Second determinant is the number and price of substitute goods. Tourist may find, that restaurant inside 5 star hotels are expensive, they will go for the alternative or cheaper restaurant outside the hotel. For example, Crown...
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