Meaning: – Every business operating in the economy has to face various ups downs while doing business activities. The fluctuations have an effect on production, price employment income.
All these fluctuations are referred as business cycle or trade cycle. Their duration in not certain but their existence is certain.
1. Certainty of fluctuations in business
2. Different effect on different industries.
3. These cycles are regular in nature.
4. Related to general activity of business.
5. It affects the entire business not partially.
6. The curve of business cycle shows upward downward movements.
Stages/ phases of business cycle:-
- Recovery: – This stage is the outcome of increased prices of the minimum level of depression has been reached. There production picks up slowly.
- Prosperity: – This is the second stage here increment in production, high prices high capital investment, high profit high ratio f formation takes place.
- Boom: – This stage is attained when the businessmen acquires extra revenue from factors of production.
- Recession: – This stage operates due to dis-economics of factors of production also adverse market conditions. Here production lowers even firms shutdown.
- Depression: – This stage are due to recession, here purchasing power falls. This stage comprises of unemployed, fall in prices of goods & services and other factors of production.
Author – Lalita Soni