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Answer to Question #45167 in Economics of Enterprise for roger

Question #45167
Two large international holiday companies have been planning to build hotel and leisure facilities for tourists on one of the island’s beaches, which is also a popular day-trip destination for local families. The government tourism minister is keen to encourage these new developments in order to ‘make best use of our resources’ . He also believes that if the hotel companies take their money elsewhere, this could lead to a loss of tourists coming to Country Y.

Q1.Explain what is meant by ‘our resources’ in this instance.

Q2.Explain the minister’s view that more hotels will ‘make best use of our resources’ .

Q3. Using the concept of scarce resources and opportunity cost, evaluate whether increased tourism may be the best use of the island’s resources in the long term.
Expert's answer
Q1.Explain what is meant by ‘our resources’ in this instance. 
‘Our resources’ are the island’s beaches whichare a popular day-trip destination for local families. As tourists on these beaches spend money during their rest, they can be counted as resourses.

Q2.Explain the minister’s view that more hotels will ‘make best use of our resources’. 
He think, that the selling of the beach to these two companies fot building hotels will give more money and increase the touristic attractiveness, than when the families come on these beaches to have rest.

Q3. Using the concept of scarce resources and opportunity cost, evaluate whether increased tourism may be the best use of the island’s resources in the long term. 
The island's beaches is not scarce resourse, and the opportunity cost of building hotels is ability of one-day trips to these beaches for families. As the building of hotels will increase the touristic attractiveness of the island and the revenues from tourism, it will be the best use of the island’s resources in the long term.

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