Economics and Business Impact Phases of the Business

Economics and Business Impact Phases of the Business Cycle Concept of Productivity and Impact on Individuals and Economy

Business Cycle Recurrent fluctuations in the economic indicators (such as GDP, inflation, unemployment, standard of living) Periods of expansion(growth) and contraction (slow down)within the national economy Sometimes called an “economic cycle” or “trade cycle” Four distinct phases of the business cycle

Four Phases of Business Cycle Follows a pattern of expansion and contraction Expansion (Prosperity) Recession Trough (Depression) Recovery

Business Cycle

Expansion Also called Prosperity Unemployment is LOW Consumer confidence and spending are HIGH Businesses prosper and invest in new product development/research A peak marks the end of this phase and the beginning of the next phase (heading back into recession)

Recession The economy slows down Businesses lay off workers Consumer confidence and spending are LOW Low demand causes decrease in production of goods and services Businesses have little money to invest A depression is a period of PROLONGED and DEEP recession

Trough Low point in the business cycle Marks the transition from recession to recovery The economy stops slowing and shows signs that a recovery is near

Recovery The economy begins to grow Jobs are created and consumers begin to spend Higher consumer demand leads to increased production of goods and services Recovery may last a long time

Factors Affecting Business Cycles Actions of Businesses expand contract in reaction to the business cycle High investment (properties, people, inventories, expand operations) during Expansion Lay off workers, cut back inventories during recession or depression Creates RIPPLE effect throughout economy

Factors Affecting Business Cycle Actions of CONSUMERS Fear of job loss and/or decrease in wages result in low consumer confidence Spend less money Impacts businesses who then have to reduce their operations due to low demand Opposite is true during periods of Prosperity

Factors Affecting Business Cycle Government policies and programs influence business cycle Increased taxes to run government programs means less money for consumers to spendwhich means less spending, less demand, and impacts business Lowering interest rates and reducing taxes can often boost a struggling economy

Concept of Productivity A measure relating a quantity or quality of output to the inputs required to produce it. Output refers to product (good/service) Input refers to the worker hours/time to create the product A measure of the output of a worker, machine, or an entire national economy in the creation of goods and services to produce wealth.

Class Experiment Divide into groups of 3 -4 people Design a paper airplane to produce in class. Develop the product name and price Produce as many airplanes as possible within the specified amount of time. When time is called, assess the productivity of your operation The class will examine the products for quality; identify which team produced the most; draw conclusions about worker productivity

Conclusions from Experiement Class Assignment: Answer the following questions: 1) What is meant by productivity 2) How did the class experiment demonstrate the concept productivity? What did you learn? 3) How do you think that productivity is impacted by the business cycle? 4) How do you think that productivity impacts the individual? 5) How do you think that productivity impacts the economy as a whole?