Four factors affecting the business cycle

The four stages of the global cycle are referred to as the market cycle. The four phases of this mechanism are expansion, height, contraction, and trough. The economy grows relatively quickly during the expansion period, with low-interest rates, increased demand, and rising inflationary pressures. When growth reaches its highest point, the loop reaches its end. Peak growth is known for causing economic imbalances that must be addressed. This correction takes place over a time of recession, during which inflation increases, wages decreases, and prices remain unchanged. When the economy reaches a low point and inflation starts to rebound, the cycle reaches its trough. Different economic schools of thought disagree about what induces an economic cycle. The credit cycle, for example, is linked by monetarists to the economic cycle. Consumer buying and economic growth are influenced by interest rates, which directly impact debt prices. On the other hand, a Keynesian perspective assumes that fluctuations in uncertainty or investment demand trigger the economic cycle, influencing consumption and wages. Marketing, finances, competitiveness, and time are all factors that influence the business cycle.

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• Finances

When a commodity hits the development stage, businesses see exponentially growing earnings. Sales slow down in the maturity period because the demand is saturated, which means that most customers who buy the commodity already have already purchased it. In the declining point, sales come to a halt.

• Marketing

Initial campaign campaigns use ads to remind prospective consumers of the availability of a commodity. Marketers provide more support for ads during the growth stage, making them cater to more customers and encourage more growth. Markets may change the product during the maturity stage by introducing new features to drive the product back into development.

• Competition

When a company enters an established market, it must differentiate itself from competitors by delivering a lower price or more attractive features. Mostly, pioneering technologies have market exclusivity until the growth level, at which point rivals see the growth and enter the market with their iterations of the product.

• Time

Business cycles can extend from months to decades, but the trend can change over time. According to the common trend, sales increase, then fall, and then stay stable in maturity before declining. Style sales experience several growth and declines, fashions adopt the conventional growth-decline-maturity formula, and fads experience rapid growth followed by a dramatic decline.

Fig.1. Causes of Buiness cycle (Economicshelp.com)

Reference:

https://doi.org/10.1108/09699981211219607