Boom, Recession, Trough and Recovery.

Promotion in the business will cause more people to find out about a businesses product and therefore more sales will be made and so the business can therefore buy more land and labour to produce more goods for their customers can buy with the money the business spends on land and labour through rent and wages. This will give the businesses more profit although if the promotion is done wrong could lead to bankruptcy.

Recession Period In the recession period less people are demanding the product a business sells and so sales fall and the economy falls. Levels of Competition because of this as there will be a smaller demand for the product and so the business will have to buy less land and labour

and so households will get less wages and rent. This will mean that households will not be able to afford to buy products in the economy. This will mean that the businesses profits will start to fall and so could lead to bankruptcy.

Investments during the recession period will rise, as the government will try to get the economy back to its original state. This will mean the business will slowly be able to increase their amount of land and labour to produce more goods for households to buy with their rent and wages. However this will be hard, as they may have to spend money on other things. This may cause the business to make tiny profits because of the investment, however this will not be a long-term solution, as you need to get customers to solve the problem.

Promotion may help, as it will boost awareness of a product a business sells, but this costs money and so the business will not make large profits. Because of the cost, the business will have to buy less land and labour and so households will get less rent and wages to buy the product the businesses have just promoted. Promotion will cause the business to make less profit in this situation as the promotion can cost a lot of money, and this can seem even more if a business doesn't sell a lot.

Trough Period A trough is when a business hits a total low. Levels of competition get harder to compete with other businesses, as there is less money to play with. With less money the business can't compete to lower prices when other companies are going through price wars to lower prices to get customers to buy their product. This means the business may face bankruptcy, as they are unable to sell their product.

Investments from the government will get larger as they want to get the economy back to its original status and maintain it. This may start to increase profits as the business gets money to buy land and labour and this provides rent and wages for households to buy the businesses products.

Promotion will again make the product more familiar to the public, however this costs money and so the business has to hope on a lot of sales to make a profit. To make a profit is very unlikely through this when a business is in a trough period.

Cwk 17/01/2004