This chapter examines tourism in the light of the underlying economic theories and
principles. Firstly, to be able to determine the contribution of the tourism sector to the
economic growth and development of the region, a thorough analysis of the relevant
economic theories and principles should be done. Thus, this chapter deals with the
following concepts : tourism as a service industry in the economy; characteristics of
services; the role and functions of a service industry in the economy; the externalities
associated with tourism; and micro – and macro-economic considerations. This is
important because the tourism industry in the economy can be generally explained
following macroeconomic principles, as it has significant influence on development,
growth, price levels, external balances and employment. On the other hand, tourists
preferences for tourists products can be analysed through the use of microeconomic
theory, for example, basic demand and supply analysis.
3.2 DEFINITIONS AND CHARACTERI