Economic cycle- Affect on businesses

The Boom Period

Sales of income elastic goods will increase significantly
Sales of normal goods will rise
Unemployment is low, so consumers have more income to spend and feel more confident about the future
Output of normal goods will rise and investment wll be increased
Many new business start- ups and existing ones expand
Sales of inferior goods will fall as consumers substitute normal goods in their place
Output of inferior goods will fall
Prices may rise as demand exceeds supply
Costs may rise as some resources become scarce; this may also increase prices
Inflation can cause problems for a business

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Sales of income elastic goods will fall
Sales of other goods begin to slow
Unemployment begins to rise and consumers feel less confident, they may reduce spending
Investment slows as expectations of growth diminish
Output slows and may fall
Increases in prices and costs begin to slow and they may begin to fall
Inflations may ease

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Sales of income elastic goods will fall significantly
Sales of normal goods will fall
Unemployment is high, consumers have less income to spens and feel more uncertain about the future
Output of normal goods will fall and investment falls
Many businesses will fail and existing ones will cut back output
Sales of inferior goods will increase as consumers but fewer normal goods and replace them with inferior goods
Output of inferior goods will rise
Prices may fall as supply exceeds demand
Costs may fall as some resources become more plentiful, this may aso reduce costs

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Sales of income elastic goods begin to recover
Sales of other goods begin to rise
Consumers begin to feel that the worst is over, unemployment begins to fall and they spend more
Investment begins to increase as confidence returns
Output begins to rise
There may be early signs of inflation as economic growth returns

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