What Is the Business Cycle?

The Business Cycle is “the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time.” (Market Economy) These fluctuations are due to supply and demand, availability of capital, consumer confidence, and other factors. Within the Business Cycle are four stages that describe the cycle. The four stages are expansion, peak, recession and trough. The expansion stage is the phase a business initially enters when coming into the market. This stage demand increases and causes the amount of input within the business to rise as well. Increased demand leads to increased sales and helps to establish the business’ name within the market. The company must have high advertising to maintain authority of the market as well as maintaining authority of a base customer group. Within the peak stage the maturity point is met because sales have reached their maximum level and are somewhat secure. The business name and image have been established in the market, along with a network of customers and other businesses as well. Seeing that the name of the business is secured, less advertising is required. The company does not venture into other areas of production and the company will not maintain or better their position in the market. The recession stage is when there is a decrease in the demand of goods within the market. A decrease in demand happens because of factors like “government policies, new strong competitors, labor problems or any other unfavorable condition that can bring about a drastic change in the economic stability.” (Amadeo) Along with these factors there is competition causing difficulty for a company to keep their hold within the market. When multiple businesses sell similar products they steal each other’s business and make it difficult for the smaller business to survive in the market. The opposite of the peak stage is the trough stage. Profits are lower, leading to lower employment, less buying, and little

Cited: 1. Manohar, Uttara. "Four Stages of a Business Cycle." Buzzle. N.p., 3 Jan. 2013. Web. 9 June 2013. . 2. "Market Economy Definition | Investopedia." Investopedia - Educating the world about finance. N.p., n.d. Web. 9 June 2013. . 3. Amadeo, Kimberly. "What Is the Business Cycle Stages and Definition." US Economy News Articles and Statistics. N.p., 28 Oct. 2011. Web. 9 June 2013. .