country
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!

Business Cycle Theory Survey Of Methods

tag 0 Download7 Pages 1,627 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Discuss About The Business Cycle Theory Survey Of Methods?

 

Answer:

Introducation

In economics, the term economies of scale takes into account the phenomenon of decrease in the cost of production, on average terms, with the gradual increase in the scale of production of goods and services by any enterprise. In other words, as a company goes no expanding and increasing its production, if its average cost of production goes on decreasing eventually, then the company is said to achieve economies of scale. Economies of scale can be of two types, external as well as internal. Internal economies of scale usually occur when a firm itself reduces its cost of production and enjoys an increased production. This is entirely specific to the firm. On the other hand, external economies of scale occurs when the industry, of which the firm is a part, as a whole experiences cost effectiveness and efficiency due to increased scope of operations (David Myers CEcD 2015).

 


Economies of scale, though can be found in many market structures, is of large importance in those markets where it is good to have a natural monopoly. In several scenarios, it may so happen that the presence of a single large firm in an industry is more efficient in terms of cost production and pricing aspects as the presence of more than one firm may increase the cost of productions for both the firms and none can enjoy economies of scale (Lewis 2013).

If the commodity provided by that industry is of necessary or merit in nature, like electricity, then it is better to allow only one big firm to enjoy economies of scale and become a natural monopolist such that it can provide the commodity at a much cheaper price due to its low cost of production. It can be seen from the above diagram.

As can be seen from the case study provided, the airlines industry in Australia, before the collapse of the Ansett group was more of a duopoly-structured industry with both the competitors Quantas and Ansett, enjoying nearly same market power and a considerable size of the market. However, in 2002-2003, after the collapse of the Ansett group and the emergence of the Virgin Blue group, though apparently the market structure remained of that of a duopoly, it can be considered to be an industry with one and a half enterprises (Aph.gov.au, 2017). This is because, the Quantas emerged as the more powerful and expansive and cash rich one with larger domain of operations. Virgin Blue on the other side, though started as a moderately sized enterprise, was seen to be gaining market importance in the market in spite of their services being limited and constricted, the restraints being imposed by the enterprise purposefully (Varian 2014).

As can be seen from the above figure, if only one single firm would have been present in the market, under monopolistic situation, the profit of the firm would have been OP0SN, under Cornot Duopoly Model. However, with the advent of another firm, the profit of the first firm decreases to OP1CN as the price falls due to competition between the two firms. The profit of the second firm becomes NHCD (Carfì and Perrone 2013).

This can be related to the scenario prevailing in the aviation industry in Australia in 2002-2003, with two prominent competitors in the market. Cornot however assumes zero cost of production, which is purely hypothetical and not true for this case. However, the profits of the firms get shared as suggested by the above diagram.

 


The business cycle of a country shows the dynamics in the economy of that country with time, including both the positive and the adverse ones, which can be seen from the performance of the country with respect to the economic indicators like the growth rates of GDP, inflation and the overall level of unemployment (Gabisch and Lorenz 2013).

In this context, taking reference to the data provided for the economy of France in the current period, it can be interpreted that the economy is in its recovery phase of the business cycle. The economy went to a severe recessionary situation, in 2008-2010, much of which can be attributed to the occurrence of the Global Economic Crisis during that period of time, which had immense negative implications on the European countries as a while (Sherman 2014). The economy, with the government budget hitting as low as -7.2 during that time, is seen to slowly recover from the shock, though the budget is still in deficit, the magnitude being much less (-3.4). The GDP growth rate of the country is still low (0.4%). However, the unemployment rate prevailing in the economy has decreased from 10% to 9.6% and there has also been a moderate decrease in the rate of inflation, from 1.2% to 0.8% in the recent times. Thus, it can be asserted that the economy, though not performing extraordinarily, is consistently coming out of the recessionary situation and is currently in the recovery period of the business cycle.

The current phase of recovery of the economy of France can be represented with the help of the AD AS Model:

With the recovery in the economy, as can be seen from the improvement in the budget statistics and the decrease in the unemployment scenario, the aggregate demand of the economy is expected to increase.

As can be seen from the above figure, with the increase in the government budget and the decrease in the trends of unemployment, the aggregate demand is expected to increase slowly, which in turn is expected to increase the GDP as well as the overall price levels. Persistence of this trend may help in increasing the supply in the economy in the long run (Benigno 2015).

Economic growth, according to the AD AS model, can be achieved if both the management demand as well as the aggregate supply goes on increasing sustainably in the economy, such that the long term goals can be achieved. The aggregate demand consists of investment expenditures, consumption expenditures, government spending and net exports. Increase in these factors helps in increasing the aggregate demand, which in turn facilitates increase in the aggregate supply.

 


In this context, France can experience economic growth by decreasing the interest rates, thereby facilitating investments in the economy. The government can also increase its investments in sectors like health, education and infrastructure, which helps in long-term capacity building, thereby contributing to the economic growth of the country. Employment generation is also a key method for economic growth as it facilitates increase in the aggregate household consumption spending, thereby contributing to the increase in the aggregate demand, which in turn increases the aggregate supply, thereby taking the economy on the path of sustained long term economic growth (Benigno 2015).

The policy taken by Macron, regarding the reforms in the labor market of France, is that of deregulation in order to make the labor market activities more flexible. However, the policy, though targeted to increase the number of good jobs available in the market of the economy, does not specifically work towards that goal (Theweek.com, 2017).

In this context, a more fruitful policy would have been investing in the development of the skills of the workers and the infrastructure in the economy, which facilitates creation of new jobs. As can be said with the help of the Cobweb Model, an increase in the skill development of the workers and a better infrastructure, in short run may create fluctuations in the labor market due to alterations in the wages and demand for more skilled workers. However, in the long run, stability can be achieved in the labor market in the following way:

 


As can be seen from the above diagram, the Cobweb Model suggests that due to the investment in education and infrastructure, which augments the skill and efficiency of the workers, in the long run the supply as well as the demand for skilled labors increase. This in turn pushes up the real wage rate from W0 to W1 (Ehrenberg and Smith 2016). A higher wage rate, in its turn, increases the purchasing power, thereby increasing the aggregate demand in the economy:

The increase in the AD, leads to an increase in the AS too, which in turn creates more scopes of employment, income generation and again an increase in the AD. This cycle goes on continuing such that in long run the economy moves to the point E1, on the Long Run supply Curve. Thus, the policy of investing on the skill development and enhancement of the workers would have been proved to be more beneficial, had it been implemented properly (Benigno 2015).

 

References

Aph.gov.au (2017). Australian Airline Industry – Parliament of Australia. [online] Aph.gov.au. Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0203/03RP10#dthe [Accessed 28 Sep. 2017].

Benigno, P., 2015. New-Keynesian Economics: An AS–AD View. Research in Economics, 69(4), pp.503-524.

Carfì, D. and Perrone, E., 2013. Asymmetric Cournot duopoly: A game complete analysis. Journal of Reviews on Global Economics, 2, pp.194-202.

David Myers CEcD, M.A., 2015. economies of scale. Economic Development Journal, 14(3), p.11.

Ehrenberg, R.G. and Smith, R.S., 2016. Modern labor economics: Theory and public policy. Routledge.

Gabisch, G. and Lorenz, H.W., 2013. Business cycle theory: a survey of methods and concepts. Springer Science & Business Media.

Lewis, W.A., 2013. Theory of economic growth (Vol. 7). Routledge.

Sherman, H.J., 2014. The business cycle: growth and crisis under capitalism. civil-engineering University Press.

Theweek.com (2017). Emmanuel Macron has misdiagnosed France's ailing economy. [online] Theweek.com. Available at: https://theweek.com/articles/705135/emmanuel-macron-misdiagnosed-frances-ailing-economy [Accessed 28 Sep. 2017].

Varian, H.R., 2014. Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton & Company.

OR

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Business Cycle Theory Survey Of Methods. Retrieved from https://myassignmenthelp.com/free-samples/business-cycle-theory-survey-of-methods.

"Business Cycle Theory Survey Of Methods." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/business-cycle-theory-survey-of-methods.

My Assignment Help (2018) Business Cycle Theory Survey Of Methods [Online]. Available from: https://myassignmenthelp.com/free-samples/business-cycle-theory-survey-of-methods
[Accessed 27 February 2020].

My Assignment Help. 'Business Cycle Theory Survey Of Methods' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/business-cycle-theory-survey-of-methods> accessed 27 February 2020.

My Assignment Help. Business Cycle Theory Survey Of Methods [Internet]. My Assignment Help. 2018 [cited 27 February 2020]. Available from: https://myassignmenthelp.com/free-samples/business-cycle-theory-survey-of-methods.


MyAssignmenthelp.com boasts a pool of 3000+ experts from different backgrounds, who are solely dedicated to providing premier quality assignment help. Due to the diversity in our expert team, we are capable of providing academic assistance in more than 100 subjects. Some of our popular services include math assignment help, economic assignment help, accounting assignment help, statistics assignment help, law assignment help and more at a reasonable price.

Latest Economics Samples

BSB113-Reducing The Congestion In Brisbane City

Download : 0 | Pages : 9

Answer: Reduction in congestion across the Brisbane city This paper gives an over view of the economic and social issues associated with reducing the congestion in Brisbane city. It describes the effects of road congestion on the economic efficient of the market equilibrium.  It also explains both the negative and positive externalities involved in this congestion. The research paper also explains the policies to be used in overcoming th...

Read More arrow

BUS702-The Role Tools And Functions Of The Reserve Bank

Download : 0 | Pages : 9

Answer: Introduction Noteworthy, the Australian financial economy policy is formulated, regulated and implemented by the Reserve Bank of Australia (RBA) which gets its power an functions from the Reserve Bank Act(1959).The Act establishes two Boards ,the payments  systems board and the Reserve Bank Board to perform some of its major functions. The bank through the implementation of monetary policy has affected the interest rates and infl...

Read More arrow

BUS700-Macroeconomic Performance Of Australia And New Zealand

Download : 0 | Pages : 13
  • Course Code: BUS700
  • University: King's Own Institute
  • Country: Australia

Answer: Introduction Australia is a mixed market economy with accounted GDP being $1.69 trillion in the year 2017.  Australia is one of the wealthiest nations after Switzerland. Australia holds the record for having longest period of undisturbed economic growth. Australia successfully maintained an economic environment of continuous growth, low level of unemployment, stable price and low public with a stable and strong financial system f...

Read More arrow

MAE10-Issues Related To Property Market In Vancouver

Download : 0 | Pages : 10
  • Course Code: MAE101
  • University: Deakin Business School
  • Country: Australia

Answers: 1.The given article has discussed about some present issues related to property market in Vancouver. According to this, prices in the property market have increased significantly and this, in turn, has generated trouble among citizens to purchase or rent new houses. For instance, young people have faced difficulties to afford rents in Vancouver at the starting phase of their career (Www-theage-com-au.ezproxy-f.deakin.edu.au. 2018). Th...

Read More arrow

ARBE2307-Economics Of The Construction Industry

Download : 0 | Pages : 12

Answer: Part A: Theoretical application 1.The location of the business or firm; the site selection process is a major factor of consideration when deciding to invest in a foreign country. This involves the identification of the geographical area that is suitable for the company’s project. The site selection is a must and therefore there is no need of going ahead in investment if there is no place to locate the business. Availability of...

Read More arrow
Next
watch

Save Time & improve Grades

Just share your requirements and get customized solutions on time.

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

1,206,971

Orders

4.9/5

Overall Rating

5,062

Experts

Our Amazing Features

delivery

On Time Delivery

Our writers make sure that all orders are submitted, prior to the deadline.

work

Plagiarism Free Work

Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.

time

24 X 7 Live Help

Feel free to contact our assignment writing services any time via phone, email or live chat.

subject

Services For All Subjects

Our writers can provide you professional writing assistance on any subject at any level.

price

Best Price Guarantee

Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.

Our Experts

Assignment writing guide
student rating student rating student rating student rating student rating 5/5

2109 Order Completed

99% Response Time

Emma Zhong

Ph.D in Project Management with Specialization in Project Communications Management

Singapore, Singapore

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

2830 Order Completed

97% Response Time

Leroy Bicknell

MBA in Marketing

London, United Kingdom

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 4/5

2594 Order Completed

95% Response Time

Michael Johnson

Masters of MSc in Economics

Washington, United States

Hire Me
Assignment writing guide
student rating student rating student rating student rating student rating 5/5

285 Order Completed

99% Response Time

Eugene Baranowski

MBA in Supply Chain

London, United Kingdom

Hire Me

FREE Tools

plagiarism

Plagiarism Checker

Get all your documents checked for plagiarism or duplicacy with us.

essay

Essay Typer

Get different kinds of essays typed in minutes with clicks.

edit

GPA Calculator

Calculate your semester grades and cumulative GPa with our GPA Calculator.

referencing

Chemical Equation Balancer

Balance any chemical equation in minutes just by entering the formula.

calculator

Word Counter & Page Calculator

Calculate the number of words and number of pages of all your academic documents.

Refer Just 5 Friends to Earn More than $2000

Check your estimated earning as per your ability

1

1

1

Your Approx Earning

Live Review

Our Mission Client Satisfaction

All things were good, the experts know what they do. I completely recommend students to visit this site.

flag

User Id: 360584 - 27 Feb 2020

Australia

student rating student rating student rating student rating student rating

GOOD JOB, IT WAS GOOD EXPERIENCE TO GET YOU GUYS TO ASSIST AT A TIME THAT I WAS HIGHLY IN NEED.

flag

User Id: 372605 - 27 Feb 2020

Australia

student rating student rating student rating student rating student rating

Achieved the goal and the writer follow instruction. I received the homework before the due date.

flag

User Id: 370099 - 27 Feb 2020

Australia

student rating student rating student rating student rating student rating

It is an excellent work done and your help is highly appreciated. I got it even before the deadline and this gives me time to reflect on it.

flag

User Id: 353962 - 27 Feb 2020

Australia

student rating student rating student rating student rating student rating
callback request mobile
Have any Query?