What are the causes of business cycles?
Business cycles in industry or even in the economy can generally occur for many reasons. It is very important for the financial well -being of society and for anyone who decides to invest in this company. Among the various causes of business cycles, problems such as consumer wishes and requirements, shifts in the economy in general, and even new technologies can cause the end of one cycle and the beginning of a new one. The beginning of the period of recession or inflation may have a significant impact on the amount of income generated by the company from the sale of goods and services. With the recession, there is a chance that many consumers will no longer be able to buy certain products, simply because of loss of jobs and other problems that reduce the amount of household income. In as Manner, inflation in the economy, especially if prices are about basic life needs such as food, clothing and shelter, it may mean that while consumers intake is stable, the amount thatu can be purchased with this income. In both scenarios, companies may find that fewer goods and services are sold, which requires the company to modify production and general operations to suit the current business or trade cycle.
Another typical cause of business cycles is to change consumer demand. Depending on the types of participating goods, consumers can easily tune these products and decide to spend a one -time income on other goods and services. In the case, the company is to face the task of making changes to products or advertising as a means to obtain the interest of consumers, both from former customers and new customers who have never known the past products. Meanwhile, it will be necessary to modify production to prevent the accumulation of high inventory, which has disappeared in warehouses for several months, increasing the financial burden of business.
Even the new technoThe logy can serve as one of the causes of business cycles. Here, the arrival of technological innovation can help in streamlining production methods that reduce operating costs, allowing business over time to earn more profit on the unit sold. At the same time, the new technology may prove to be mortality for some companies that produce appliances and other electrical equipment that are now considered obsolete. If these companies cannot properly predict the causes of the trade cycles that appear, and the place to adapt to the new business cycle, the company's revenues will be reduced and the business will lose the market share, probably to the extent that it fails.