Fundamental Economic Problem - 1018 Words

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) â€Å"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.†¦show more content†¦Depending on the profit of each area, the manager will decide which area should be extended and will gain more profit. If the restaurant earns more money than the other, the manager will extend the restaurant floor to accommodate more seats for the customer. Third determinant of supply is the profitability of goods in joint supply. It is describe as when one good is created; another good is also created at the same time. For instance, restaurant serves for people having lunch or dinner constantly but also they provide functions room for birthday or engagement party. They can provide range of service at the same time. Fourth determinant of supply is nature, random shock and other unpredictable events. This is can be earthquakes, floods, fire, machinery breakdown etc. that can affect restaurant facilities. This can decrease their supply for the restaurant and services. Fifth determinant of supply is the aims of producers. Profit-maximising manufacturer will supply different quantity from a manufacturer that has different aim, like maximising sales. For example, restaurant A will supply good quantity of food in higher price; restaurant B will supply the same good quantity of food but in reasonable price. Sixth determinant of supply is expectation of future changes. If the prices are expected to increase, the producers may momentary decrease the amount they sell. For example, after Christmas, customer will tend to stay home or visit theirShow MoreRelatedFundamental Problems of Economic System3980 Words   |  16 PagesUNIT 1 – FUNDAMENTAL PROBLEMS OF ECONOMIC SYSTEMS 1.1 INTRODUCTION In this unit you will get acquainted with the fundamental problems of the economy. The understanding of the concept will help you bring closer to the basic idea of the economy’s problems as well as remedies of such problems. 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