Scribd Logo
Upload

Welcome to Scribd!

  • Recession: Before, Understanding "Recession", We Need To Understand The Market Economy

    Uploaded by

    Sunil Bhardwaj
    16 views8 pages
    Recession occurs when an economy experiences declining growth or contraction across two consecutive quarters, as measured by GDP. This typically happens due to overproduction when supply exceeds demand, often caused by incorrect projections of demand. It can also be caused by a loss of confidence throughout the market as consumers and businesses hear of job losses, bankruptcies, and falling demand. This loss of confidence leads consumers to save rather than spend, creating a downward economic spiral and reducing demand further. Specific events like terrorist attacks can trigger recessions by creating widespread fear and causing industries like airlines and hotels to cut costs through job losses and reduced services.

    Original Description:

    Original Title

    Recession

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    Recession occurs when an economy experiences declining growth or contraction across two consecutive quarters, as measured by GDP. This typically happens due to overproduction when supply exceeds demand, often caused by incorrect projections of demand. It can also be caused by a loss of confidence throughout the market as consumers and businesses hear of job losses, bankruptcies, and falling demand. This loss of confidence leads consumers to save rather than spend, creating a downward economic spiral and reducing demand further. Specific events like terrorist attacks can trigger recessions by creating widespread fear and causing industries like airlines and hotels to cut costs through job losses and reduced services.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    16 views8 pages

    Recession: Before, Understanding "Recession", We Need To Understand The Market Economy

    Uploaded by

    Sunil Bhardwaj
    Recession occurs when an economy experiences declining growth or contraction across two consecutive quarters, as measured by GDP. This typically happens due to overproduction when supply exceeds demand, often caused by incorrect projections of demand. It can also be caused by a loss of confidence throughout the market as consumers and businesses hear of job losses, bankruptcies, and falling demand. This loss of confidence leads consumers to save rather than spend, creating a downward economic spiral and reducing demand further. Specific events like terrorist attacks can trigger recessions by creating widespread fear and causing industries like airlines and hotels to cut costs through job losses and reduced services.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 8

    RECESSION

    Before, understanding Recession, we need to understand the market economy;


    A] TWO STAGES OF MARKET ECONOMY B] TWO FACTORS OF MARKET; - DEMAND & SUPPLY

    A] TWO STAGES OF MARKET ECONOMY


    A1] Growing Market Economy A2] Declining Market Economy

    Growing Market Economy

    [Type text]

    Page 1

    Declining Market Economy

    [Type text]

    Page 2

    TWO FACTORS OF MARKET; - DEMAND & SUPPLY


    Producer wants his demand always to be high Consumer wants his buying cost always to be low

    Actually, Demand is the price at which consumer is ready to buy and producer is ready to sell; Usually, we think; Demand = Quantity But, here Demand = Price; This is because, Price decides the Quantity of Sales; Competitive Price = More Demand; In competitive Price = Less Demand;

    Producer Price Consumer Price

    [Type text]

    Page 3

    What is recession?
    Recession
    Recession is the economy shrinking for two consecutive quarters (=6 months) with a decrease in the GDP (=Gross Domestic Product) GDP = Value of all the reported goods and services produced by the people operating in the country GDP = MONEY VALUE OF {C + I + G + (X M)} C = Consumables, I = Gross Investments, G = Government Spending, X = Exports, M = Imports GDP is a good indicator of economy; other indicators could be; -Unemployment Rate -Consumption Rate -Actual Personal Income -Etc.. If GDP is growing, then market is growing due to increased demand;

    Note: If the recession continues for next quarter, (>6 months) then we go through DEPRESSION Economy;

    Why Recession happens?


    1] OVER PRODUCTION 2] LOW CONFIDENCE LEVEL

    OVER PRODUCTION

    PSEUDO DEMAND
    ACTUAL NEED WAS NOT THERE; WRONG PROJECTIONS COMPANIES PRODUCED MORE

    A situation in which the supply exceeds the nations ability to consume what has been produced;
    Supply > Demand

    [Type text]

    Page 4

    LOW CONFIDENCE LEVEL

    Word of mouth
    Word of mouth

    Assignable Cause

    Low Confidence Level of Millions of consumers and producers after they hear many job cuts, Demand coming down, Companies bankruptcy, etc. Consumers fear that they may lose their jobs; so, they have less confidence to spend money and buy goods; this will result in reduction in demand in the market; Consumers start saving money instead of spending money; This is a downward spiral in the economy; Producers do not stock materials; they reduce their productions, gets into the cost reduction activities, worried about the profitability, etc

    [Type text]

    Page 5

    Assignable Cause
    Bad Incidences Happening; Example: September 11 Terrorist Attack in US; International Airport blocks in Thailand; Mumbai Attacked in India;

    etc

    Terrorists Attack on 11 September in US


    Created fear in people

    th

    People cancelled their travel plans

    Resulted in low occupancy rates

    Airlines & Hotel Industries badly hit

    Airline & Hotel Industries offered discounts, Gift coupons, to attract people

    But, still, no improvement in occupancy rate


    Airline & Hotel Industries started Cost Reduction activities
    CONTINUED IN NEXT PAGE
    [Type text] Page 6

    Airline & Hotel Industries started Cost Reduction activities

    i] Reduce No. of flights

    ii] Lay off people

    iii] Salary reduction to Not laid off people

    In-flight meals reduced

    Low or No income to spend and buy goods

    They became careful due to the fear of loss of job

    Meals supplying company got the hit

    Demand for other goods come down

    Started saving money Instead of spending

    Catering company now, lays off people

    Demand for other goods Come down

    [Type text]

    Page 7

    [Type text]

    Page 8

    You might also like