Unit 2

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  • Created by: Abbie
  • Created on: 30-05-13 12:33

Boom period - a rapid growth & expansion in the economy.

Advantages

  • Sales of income elastic goods will increase significantly
  • Sales of normal goods will rise
  • Unemployment is low, consumers have more income to spend and feel more confident about the future.
  • Many new business start-ups
  • Existing businesses will expand.
  • Businesses tend to increase their investment

Disadvantages

  • Sales of inferior goods will fall as consumers substitute normal goods in their place
  • Output of normal goods will fall
  • Costs may rise as some resources are becoming scarce
  • Inflation can cause problems

Evaluation

 A period of boom does not last forever. During this period it becomes difficult to sustain growth. The demand for goods and services simply outstrips the ability of all of the businesses within the economy to supply all of the goods and services that consumers would like. This is known as overheating - inflation accelerates and the government may intervene by increasing taxes or interest rates. Growth slows and a downturn begins to take place.

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