What isthe economy?The economyis the amount of money being created within a country, due toproduction/consumption within the country and the supply of money. This can beaffected by many factors such as wages and consumer spending to name a few. Theeconomic cycle is the natural change between economic growth and recession. GDP(gross domestic product), employment levels, interest rates and consumerspending all contribute to the determining of the specific stage of theeconomic cycle. The economic cycle changes every quarter of a year. GrowthA period ofeconomic boom occurs when more goods are being produced than being consumed,and the GDP is rising. There is somewhat of a ripple effect which results ineconomic growth – people have more money to buy more things, which increasesdemand, so more labour is required (creating jobs), not only within theorganizations themselves, but also for machinery firms, who need to hire morelabourers to keep up with the demand.RecessionA recessionis a period of economic decline.
This is when the GDP has been declining for 2+quarters (¼ = 3 months/12 weeks). Duringrecession, there are some negative effects, such as:People startsaving money as opposed to spending – this could lead to the demand forservices and goods falling – leading to: Businesses selling less, due toconsumers’ lack of disposable income – and therefore, making less profit. Businessesmaking less profit could possibly cause many workers being made redundant becauseof budget cuts – due to the business attempting to maximise profit.DemandIn theperiod of growth, which was from 1995-2008, EasyJet had high demand, as peoplewere planning more holidays, as they had more money to spend, due to the periodof economic growth. The high demand meant that EasyJet could expand itsorganisation and they bought 200 new planes in 1995. Additionally, as theeconomy was growing, EasyJet could buy a lot of fuel, which meant that theycould fly to even more, further destinations, which could further increasetheir profits due to them having a wider range of destinations than theircompetition, so more people would want to fly with them. In June 2008, EasyJetreported an increase of passengers by 19.
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5% – which is undeniable proof of agrowth in the economy.During the2008-2010 period of recession, EasyJet’s demand stays high, as they are abudget airline – which means that although people don’t have a lot of money,they still have enough to pay for EasyJet’s inexpensive short haul flights. However,as the company was going through a period of recession, the cost of materialswent up, which would reduce the profits of EasyJet. Since EasyJet needs thesematerials to continue doing business, and are still paying, despite the rise incosts, inelastic demand is present. Ultimately, although the business EasyJetis getting is decent, they aren’t making the same amount of money as they wouldin a period of economic growth.
Supply DuringEasyJet’s period of growth, they would need suppliers for goods such as: fuel,food & drinks, paper, airplanes and shuttles. EasyJet would be looking forthe most inexpensive supplier to make sure their expenses are as low aspossible, so that they can maximise their profits. During their growth period,acquiring raw materials was much easier as they had money for them and due toeconomic boom, raw materials such as fuel were cheaper, which means that evenmore flights could be made possible – maximising EasyJet’s profits. Also,labour is a very important part of supply, as every business would need labourto operate successfully and efficiently. During an economic boom/growth period,more jobs should become available, as a business may be expanding – inEasyJet’s case, as their flights are available at more airports due toexpansion, then more staff such as flight attendants and ticket stall clerksare required, creating more jobs.
Furthermore, in times of economic growth,EasyJet should offer incentives to ensure that they have the necessary numberof employees.During aperiod of economic recession, the acquisition of raw materials may prove to bequite difficult, as they would be considerably more expensive to purchase forEasyJet. Additionally, as the supply has diminished, EasyJet may find it hardto obtain the raw materials. As the supply couldn’t keep up with the highdemand, prices rose – this caused the redundancy of many EasyJet workers,because they could not afford to keep paying many employees’ wages, becausethey need to purchase supplies, and they needed to make sure their profits werehigh as possible. Also, the price of fuel is also one of the most importantexpenses – as it is what the planes run on, without it, EasyJet would not beable to fulfil their purpose of providing a flight service to their customersas their planes won’t be able to take off.GlobalInteractionLots oflarge companies have become globalised since the 80’s.
Globalisation is when anorganization expands itself into foreign economies, due to exportation ofgoods/foreign investment. A reason for a company becoming globalised would benot only lower costs, but also larger customer databases. Additionally, gettingproducts from countries which are currently developing makes globalisation morecheap and easier.