Why the price elasticity of demand for foreign holidays is likely to be elastic, what would be the consequences of the U.K exchange rate on the U.K firms that supply foreign holidays?)

... Cristina Valencia 11th Grade Economics SL Mr. Allan 2004-02-28 Economics Analysis Essay (Why the price elasticity of demand for foreign holidays is likely to be elastic, what would be the consequences of the U.K exchange rate on the U.K firms that supply foreign holidays?) In most European Countries, the tourism industry constitutes an important source of income and employment. Research has shown that the demand for tourism services is significantly dependent on the development of exchange rate. Tourism has been regarded as a major source of economic growth, this supplements foreign exchange earnings already derived from trade and commodities. We find that developed countries such as the U.K have a price elasticity of one, while tourism to less developed counties is unresponsive to price fluctuations. If tourism is largely discretionary, then demand is elastic to price increases. Before considering the essay question, it is critical to define what price elasticity is.

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