Economics News Analysis
Diana Li (15) F.4B
Rachel Lo (17) F.4B
Economics News Analysis
Diana Li (15) F.4B
Rachel Lo (17) F.4B
Newspaper Article
Title:
Name of newspaper:
Date of issue:
Millions wasted in underused centres (by Jimmy Cheung)
South China Morning Post
25thNovember, 2004
Description of the issue
According to the Audit Commission of the Hong Kong government, the
revenue of the Leisure and Cultural Services Department’s sports centres was only a
quarter of the expenditure, and the revenue from training courses only recovered
about half of the cost. Some sport facilities were used for less than 10 percent of the
time that they were open. The revenue in fees and charges from the department’s 83
sport centres in urban areas and the New Territories was about $140 million in
2003-2004, compared with the expenditure of $574 million.
Also, the Audit checks found that five squash courts had been extremely
under utilised, with the usage rate ranging from only 2.5 to 8.6 percent during
2002-2003.
Moreover, the overall usage rate for fitness rooms was 18.2 percent in April
this year. The total revenue from fitness training course was only $13.9 million
while the expenditure was $25.8 million. The Audit Commission said that it was not
cost-effective to provide instructors at 19 designated fitness rooms at such a low
usage rate.
The watchdog of the Audit Commission suggested that the Leisure and
Cultural Department should charge less in non-peak hours for facilities in urban areas
in order to increase off-peak use. The Commission estimated potential revenue of
$2.7 million could have been received by raising fees to cover the costs and
introducing peak and non-peak hour charges.
Economics News Analysis
Diana Li (15) F.4B
Rachel Lo (17) F.4B
Explanation of the issue
Initially, sport ground is an economic good as its quantity is insufficient to
satisfy all human wants. Also, people prefer more of it and they are willing to pay a
price to get it. And also, there is a cost of production.
However, the fees of the sport grounds (P1) are larger than the equilibrium
fees of the sport grounds (Pe). So the quantity demanded of sports ground (Qd) is
smaller than the quantity supplied of sports ground (Qs). Excess supply of sports
ground exists as illustrated in Figure 1 below:
Figure 1
Economics News Analysis
Diana Li (15) F.4B
Rachel Lo (17) F.4B
Therefore, the Leisure and Cultural Services Department decided to
increase the fee of the sports ground. If the fee of the sports ground increases (P1 to
P2), the quantity demanded will keep on decreasing (Qd1 to Qd2). Thus, this will
increase the excess supply as illustrated in Figure 2 below:
Figure 2
Economics News Analysis
Diana Li (15) F.4B
Rachel Lo (17) F.4B
At the same time, the Leisure and Cultural Services Department decided to
charge less in the non-peak hour of the sports ground in urban area. If the fee of the
sports ground decreases in off-peak hours (P1 to P2), the quantity demanded at that
time will increase (Qd1 to Qd2). So it will decrease the excess supply as illustrated
in Figure 3 below:
Figure 3