MACRO SLP 5- Business cycles: phases, indicators, measures, economic evolution, outlooks - Essay Example

Economics Economics Business cycles represent the regular swings or fluctuations that occur in a country’s economic growth and the long-term trends exhibited in the growth rate of total production. It also entails the economic expansions and contractions of the overall business activity evidenced by changes in the GNP, GDP, unemployment rates, and inflation (Hirschey, 2009). Conversely, cyclical economic variation is a type of cyclical fluctuation defined by irregular phases of economic expansions or upswings and contractions or downswings that last for over a year from the peak to the trough of a cycle.

During the period of economic contraction, the consumer and business demand declines. However, during expansion, the demand increases (Hirschey, 2009). All through the cyclical fluctuation period, businesses react to the effects differently.The organization under discussion is a beauty shop and spa that provides services to women from all over the country. The business location also offers an opportunity for the business to serve local tourist women too. In the previous financial year, the business has enjoyed slightly increased profitability.

However, in previous years, and with the recession and rise of unemployment the shop experienced decreased proceeds. This has been predominantly true of this organization because it is more of a luxury service that require extra consumer spending.This organization is sensitive to both the economic expansions and contractions in the economy. Economic contractions or recession represents a stage in a business cycle where the economy is in decline. This results to an economic hardship where the rate of unemployment increases.

As a result, the rate of consumer spending decreases since individuals cut down on luxury spending. Therefore, this business depends on the economy’s stability that by extension determines the consumers’ income. This is because it offers luxury services that amount to extra consumer expenditure. The decrease in consumer spending may also prompt the businesses to cut back on their staff in order to minimize operating costs and holdup the capital investment decisions (Hirschey, 2009). The organization may trim down the number of service’s shifts in order to cut the operating expenses incurred.

Similarly, any expansion strategies may delay expanding this business. An increased income results to increased consumer spending. A reduction n consumer spending leads to a decrease in the business’s income. Conversely, economic expansion results to reverse effects. The employment rate increases and individuals earn more from their respective jobs (Hirschey, 2009). Consequently, the demand for expensive and luxury items and services increase. In the short-run, the demand exceeds the supply of these services.

However, this service business reacts promptly to the demand by increasing the supply through adding the service shifts. This also calls for additional staff in order to increase the provision of their services and eventually maximize their profitability. The employment, wages, and prices are likely to affect this beauty shop and spa business in the future. According to the Fed report, different districts registered various levels of employment levels and hiring procedures. The labor markets show different signs of lack and availability of employment opportunities.

The numbers of qualified applicants of various available positions in different districts are reported to vary. The Fed’s reports predict that these conditions will prevail to the near future. Consequently, the number of individuals who enjoy regular wages may either decrease or maintain its levels in the economy. This affects the number of individuals willing to spend money on luxury services in the beauty and spa business. Therefore, this affects the future operations and profitability of the organization.

ReferenceHirschey, M. (2009). Managerial Economics. Mason, OH: South-Western Cengage Learning.