Trade cycle-schumpeter description, Managerial Economics

Assignment Help:

Schumpeter Description

According to Schumpeter, a cycle represents wave like deviations in business activity from the equilibrium or trend line. There are equilibrium points and the equilibrium areas cluster around these equilibrium points. Schumpeter analysis involves the four phase cycle consisting of the prosperity, recession, depression and recovery. The business cycle is divided into two parts the upper half and the lower half. The upper half part of the cycle above the trend or equilibrium line is divided into prosperity and recession while the lower half part of the cycle below the trend line is divided into depression and recovery. Figure shown below illustrates the four phase Schumpeterian trade cycle. In the fig. the prosperity and recession phases show that the level of aggregate economic activity in the economy is above normal while the depression and recovery phases show that the economy is operating at below normal level of economic activity. In the prosperity phase, employment continues to increase but at a diminishing rate until the cycle peak is reached. In the recession phase, employment decreases at an accelerating rate until the Point of inflection is reached at B. Hereafter, the cycle moves into the lower half of the four phase cycle. The lower half, like the upper half, is also divided into the two phase of depression and recovery. In the depression phase, employment continues to fall but the rate of fall gradually decreases until the cycle trough is reached. In the recovery phase employment continues to increase at an increasing rate until the point of inflection reached.

 

572_download.jpg


Related Discussions:- Trade cycle-schumpeter description

Corporate profit maximization , Difference between corporate profit maximiz...

Difference between corporate profit maximization and maximization of shareholder wealth? Ans) Sure, profit maximization relates to profits *only* while shareholder wealth also i

Long run output, LONG RUN OUTPUT In the LR whether or not the firm mak...

LONG RUN OUTPUT In the LR whether or not the firm makes profit will depend on the conditions of entry.  For example, when surplus profits exist, there will be new entrants bec

Factors influencing supply curve - goals of the firm, Goals of the firm ...

Goals of the firm How much is produced by a firm depends on its objectives.  A firm which aims to maximise its sales revenue, for example, will generally supply a greater quant

Profit maximization theory of business, critically analysis the profit maxi...

critically analysis the profit maximisation theory of business firm and illucidet the role of profit in business

Mankiw model of nominal rigidities, Mankiw Model of Nominal Rigidities   ...

Mankiw Model of Nominal Rigidities   There are two related reasons for which  firms do not  frequently change prices. First, as we saw in the discussion on menu costs, the cost

How government intervenes to improve allocation of resources, Problem 1: ...

Problem 1: You are the manager of a reputed five star hotel in Mauritius and you have been asked by the director of the hotel to advise on possible pricing strategies to increa

Location problem in the plane, Location problem in the plane: In Kent, ...

Location problem in the plane: In Kent, the council to respond to the people and government needs, it decided to establish 3 community care homes. The towns are recorded with t

Clark''s dynamic theory, According to J.B. Clark's profits arises in a dyna...

According to J.B. Clark's profits arises in a dynamic economy, not in a static one. A static economy is one in which there is absolute freedom of competition population and capital

Full-service department, Like supermarkets, full-service department stores ...

Like supermarkets, full-service department stores like Macy's are mainly in decline. What factors may these types of stores have in common behind their declines? How would you veri

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd