The second determinant that is going to be examined is population. In the case of Colombia we must consider that is a third world country which has 22 million of poor people. The high class who is the one that can afford vacation in Australia is very small and even if they could afford the vacations because of the reasons exposed on tastes and preferences Australia won’t be their first choice. Analyzing that population is increasing; theory says that is population increases demand increases. The theory is not operative in Colombia for the service of vacation in Australia because Colombia is a particular case. Standard of living and wealth in Colombia are divided in six levels where six is the best and one is the worst. Population on levels five and six is being reduced because people who belong to this type of society don’t want to have children. In the other hand from levels 1-3 population is surely increasing because birth control is not promoted. Returning to the theory, in this case demand should have been increased, but because it is increasing on the sectors where people can’t afford to buy vacation to Australia the increase in population would not affect the demand unless enormous discounts are made so that people of level four can buy them.
Income is also something that could affect the quantity demanded for vacations in Australia. If people earn more and the price of vacations in Australia is kept the same the quantity demanded is going to increase because people are now earning more money so they can spend the extra resources on more expensive place for vacations such as Australia. This in the case of high people because poor people have to use that extra money to solve other problems rather than vacation.
Now we are going to evaluate if price of relative goods affect quantity demanded for vacations in Australia. In this case the relative goods that must be considered should be vacation but in other place instead of Australia. This will surely affect demand considering that for vacation; the culture in Colombia is that the further you travel the better the vacations are. So if vacations to the United States and to Australia are at the same price, the consumer will choose to enjoy his vacation in Australia just for the fact is further from Colombia. But as the theory says: if the relative price of a substitution good is smaller, the consumer will substitute the expensive service for the cheaper one so the consumer will choose to go to the United States in vacation if its cheaper than Australia and vice versa.
The change in future expectation of relative price is another determinant that we should consider if it affects or not the demand of vacations in Australia. If the price of vacations in Australia is going to increase in the future the theory says that the demand is going to increase because people want to buy it before the price increases. In the case of Colombia for this to occur we have to consider the % of change in price. For example if the price is going to rise by 20% in two months, demand in these two months is going to increase because in two months many people could not afford to buy it and they must take advantage of the actual price. But if the price is going by 2% demand if it changes, is going to change very little because the people who buy the packages of vacation in Australia could by them now or in two months without being affected.
Another very important factor that can affect demand of vacation in Australia is traveling and transportation. This is very important because the fact that there is not a direct flight from Bogotá to Sidney or any other city in Australia makes the vacations less pleasant. This will forces people to think if they really want to suffer all those difficulties in traveling or choosing a more pleasant and less complicated destination. This at the same time will cause a reduction in demand because several people will choose the pleasant vacations, reducing the amount of people going to Australia. This variable depends only on tastes and preferences of people who are making the choice.
When there has been a change in price the movement occurs along the demand curve showing how much quantity demanded is found at a particular price (fig 3). As explained before, when price increases quantity demanded decreases
In conclusion there are several price determinants that may affect demand of Vacation in Australia; some of them may increase the demand while others can decrease it. The ones which increase the quantity demanded are price of relative goods, income and enormous changes in future expectation of prices. The first one of them is because if the consumer has the choice to go to Australia or some where nearer for the same price, he will choose Australia because is further away and can go to there for the same price as a nearer place. In the case of income the quantity demanded is going to increase because now people with high acquiring power can spend their extra money on more expensive vacations such as vacations in Australia. The last one of them is because if the price is going to increase severely, people will buy it more before the price goes up. Whenever any of these determinants occur there is a shift to the right side in the demand curve (fig 4). In the other hand, there are determinants that reduce quantity demanded. This is the case of travel and transportation because if there is not a direct flight from Colombia to Australia, the vacations become less pleasant and consumers don’t like that. Instead they buy more pleasant vacations for the same price as holidays in Australia so this will reduce the demand of them. When this happens there is an inward shift on the demand curve (fig 5). Also there are other determinants that don’t affect vacations in Australia. These determinants are: taste and preferences, population and small changes in future expectations of relative price. For taste and preferences the reason why it does not affect vacations in Australia is because the ones going are the want who really want to go and chose Australia as their destination over many others. This is because in Colombia there is no advertising about vacations in Australia so the number of Colombian tourists will be more or less the same always. In the case of population the reason why it does not affect demand is because the population is growing in the sectors which cannot buy vacation to Australia so the number of people who buy them are kept constant. Finally talking about small change in future expectations of price we can say that this doesn’t affect demand because the ones who buy vacation to Australia are high class people who have a lot of money so if the price changes by 1 or 2% they can still afford to buy it so this will not change quantity demanded.
