As regards the scope of business economics, no uniformity of views exists among. These are adapted or modified with a view to enable the manager take. ![]() Scm 303 quizlet. Business cycle Managerial Economics • 1. Business Cycle The term business cycle is referred to the recurrent ups and downs in the level of economic activity that extend over a period of time. The business fluctuations occur in aggregate variable such as national income, employment and price level. ![]() Business cycle is also called as “Trade Cycle” Business Cycle-Martin Thomas • 4 Phases of Business Cycle Prosperity Phase: Expansion or Boom or Upswing of economy. Recession Phase: from prosperity to recession (upper turning point). Depression Phase: Contraction or Downswing of economy. Recovery Phase: from depression to prosperity (lower turning Point). Business Cycle-Martin Thomas • Prosperity: Expansion & Peak When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. This period is termed as Prosperity phase. Rise in the national output & trade Rise in consumer and capital expenditure Rise in the Price of raw materials and finished goods Rise in the level of income & employment Business Cycle-Martin Thomas Fig.1 • Recession & Turning Point During a recession period, the economic activities slow down. When demand starts falling, the overproduction and future investment plans are also given up. There is a steady decline in the output, income, employment, prices and profits. Business Cycle-Martin Thomas • Depression & Trough When there is a continuous decrease of output, income, employment, prices and profits, there is a fall in the standard of living and depression sets in. During the phase of Depression: The growth rate become negative The level of national income and expenditure declines Price of consumer and capital goods decline Workers lose their job Business Cycle-Martin Thomas • Recovery Phase As the recovery gathers momentum, some firms plan additional investment; some undertake renovation programmes, and some undertake both. These activities generate construction activities in both consumer & capital goods sector. As a result more employment is generated and wage rates moving upward. Business Cycle-Martin Thomas • TROUGH Fig.2 Business Cycle-Martin Thomas • Fig.3 Business Cycle-Martin Thomas • Thank you Business Cycle-Martin Thomas.
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