Harberler has described depression as “a state of affairs in which real income consumed or volume of production per head and the rate of employment are falling and are sub-normal in the sense that there are idle resources and unused capacity, especially unused labour.”. Answer or comment. Since incomes rise, consumer spending also rises to encourage increased production. Characteristics or Business Cycles 3. As investors become more confident, expanding productive activity takes the economy to a boom or prosperity phase. The reason for firm shut down in perfect competition. The whole process becomes self-reinforcing. This means as income increases, the tax contribution should also increase. We're here to answer any questions you have about our services. In this way the wave of pessimism gets transmitted to other sectors of the economy. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply. For example, consumer electronics can easily be physically differentiated. While the producers try to dispose of their stocks at the current market prices, the consumers tend to postpone their purchases in the hope that the prices would fall further and they would be able to benefit from it. Recovery shows the upturn of the output and employment of the economy from the state of depression. Answered To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on the UKDiss.com website then please: Our academic writing and marking services can help you! Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. After the peak point is reached there is a declining phase of recession followed by a depression. 914-6609-4887 Have fun and be creative! Each of … stagnant prices high levels of production ambivalence about the economy reduced incomes - edu-answer.com Which best describes how governments respond to changes in the business cycle? Low income group people pay low tax, whereas the high income group people pay higher tax. Recession Phase: from prosperity to recession (upper turning point). Log in. Though the general structure of different cycles may be the same, it may not be perfectly rhythmical in character. Generally, prices and production fall or rise together. The businessmen gain confidence and become optimistic (Positive). 2. jonathanfelfoldy is waiting for your help. Q4 Explain the various methods of forecasting demand? Obtain as much information about competitors’ performance as you can. 2. During a recession, what is one way governments try to encourage growth? There are usually a large numbers of independent firms competing in the market. Check all that apply. 1. Thirdly, excessive demand for labour and materials pushes up both the factor and the product prices but in a disproportionate fashion. Begin with an analysis of the marketplace, reviewing the economic conditions. Time is measured along the x-axis. Which of the following is a characteristic of the prosperity phase of the business cycle? The whole process becomes self-reinforcing. VAT Registration No: 842417633. It is international in character. Firms are often in fierce competition with other (local) firms offering a similar product or service, and may need to advertise on a local basis, to let customers know their differences. All three are displayed in the table to the right. Every phase has germs of the next phase, that is, expansion has the germs of the recession in it. Ans: A market structure characterized by a single seller, selling a unique product in the market. This period is termed as Prosperity phase.The features of prosperity are :- High level of output and trade, High level of effective demand, High level of income and employment, Rising interest rates, Inflation, Large expansion of bank credit, Overall business optimism. Effects 6. The economy has passed the trough. First, find the indicators that relate to your business. This style of demand forecasting works better with industrial buyers rather than retail. Looking for a flexible role? Price Discrimination : It is the ability to charge different prices to different individual. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. *You can also browse our support articles here >. As unemployment rates rise, average prices fall. Increase the economic welfare. As unemployment increases, the wages tend to fall under its pressure. ... the characteristic features of a depression are the reverse of prosperity: ... A business cycle is a complex phenomenon which embraces the entire economic system. The other two are profit maximization and loss minimization. For many goods, the length of the product cycle is shrinking. C. Car dealerships cannot sell their stock. The most critical is confidence in the future. Each producer can set its price and quantity without affecting the market place as a whole. does anyone want to join a zoom meeting Even the projects in hand may be abandoned. Which best describes how a recession develops as demand and production decrease? Q5 Define monopolistic competition and explain its characteristics? Which of the following is a characteristic of the prosperity phase of the business cycle? How does manufacturing support our standard of living?green initiatives like recyclingproviding opportunities for unskilled workersproducing goods tha This is not an example of the work produced by our Essay Writing Service. 3. A more subjective approach uses expert opinions to predict demand. What is measured along the y-axis? Depression or slump leads to redistribution of the national income. Scared by the general slump in the economy, the financial institutions press the producing firms to return their advances according to the contract. The capital goods have a limited life. During the recovery phase, rise in output and incomes of the people induces substantial increase in aggregate spending. Again the business cycle continues similarly with ups and downs. Sales performance of other goods with similar product attributes may serve as proxies for a current product with no track record. Instruments of Fiscal Policy: Some important instruments of fiscal policy are: – 1.TAXATION: Taxation is always a very important source of revenue for both developed and developing countries. The whole economic system thereby runs into a crisis. Monopolies can afford to invest in latest technology and machinery in order to be efficient and to avoid competition. Recovery Phase : from depression to prosperity (lower turning Point). Thus the next stage of the trade cycle, called recession of deflation starts. For example, breakfast cereals can easily be differentiated through packaging. When there is depression, the income decreases and many people fall in the no-income-tax bracket and the tax revenue decreases. In other words, peak phase refers to the phase in which the increase in growth rate of business cycle achieves its maximum limit. 5. Monopolistically competitive markets exhibit the following characteristics: Q6 When should a firm in perfectly competitive market shut down its operation? Progressive tax: Progressive tax says that higher the level of income, greater the volume of tax burden you have to bear. The Kondratiev cycle or Kondratiev wave is a cycle-like phenomenon of economic expansion and contraction over a fifty-year period. One justification for this practice is that producing goods and services for sale to one identifiable group of customers is less than the cost of sales to another group of customers. Profits fluctuate by a larger percentage than the other types of income. Which best describes what is represented in the business cycle model? The long-term cycle that exists in capitalist economies represents long-term, high- and low-growth economic periods. The aggregate economic activity is at the lowest, causing a decline in prices and profits until the economy reaches its Trough (low point). The cost of goods like refrigerators and cars will be higher because they must be custom produced. It is a very long-duration cycle of major capital goods expansion and contraction. The other two are profit maximization (if price exceeds average total cost) and loss minimization (if price is greater than average variable cost but less than average total cost). Get an answer to your question "Which of the following is a characteristic of the prosperity phase of the business cycle? Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. All these factors restrict the entry of other sellers in the market. This is the most critical and fearful stage of a trade cycle. jonathanfelfoldy jonathanfelfoldy 04/09/2020 Business Middle School +9 pts. But there need not be uniformity in the extent and magnitude. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Plotting sales over time will reveal the presence of a sales trend if one exists. The cost of goods like refrigerators and cars will be lower because they are imported. Ask your question. It reduces investment. 2. prosperity. 1. depression. The key to this loss minimization production decision is a comparison of the loss incurred from producing with the loss incurred from not producing. In this situation suppose production is stimulated by one reason or other. If you have historical data — or if you can create it from related products — trend analysis is the first step in demand forecasting. Join now. Due to the fact that monopolies make lot of profits, it can be used for research and development and to maintain their status as a monopoly. Causes 5. Businesses can create alternative pricing methods that distinguish high-volume buyers from low-volume buyers. Financial institutions including banks cannot expand credit beyond a limit put by their reserve requirements. You can make these through either Google docs, slides, or with paper, poster board. They wear out completely after some time and need replacement. The business cycle occurs periodically in a wave-like fashion with varying magnitude affecting not only the entire economy of the country but also making its impact on economies of other countries. Need and, hence, demand increase as goods wear out. As effective demand increases, income rises faster than before. Check all that apply. However, they cannot fully appreciate the restaurant or the meal until after they have dined. Production and demand in a town, before ordering the slump, prices and decrease... Prices to different groups of customers: Air tickets, movie tickets, tickets!, excise duty and custom duties its market, as prices rise, tend. Growth rate of expansion might also act as a whole these factors restrict the entry of other with... To its destructive ability ” on individual ( direct tax includes income tax, corporate tax, the. High but demand is very high but demand is very high but demand is very low, it can to... 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