Economic Growth, Recession, Growth through improved quality, Changes in labour force, Barriers to growth in LEDC's

2) Economic Growth
Cycle Phase: Features:
Peak or Boom *Low Unemployment
*High consumer expenditure, investment and export earnings
*Good cash flow for businesses
*Higher levels of profits

Recession *Rising Unemployment
*Declining total demand
*Lower Investment expenditure
*Falling export sales

Slump or Trough *High Unemployment
*Very low consumer spending, Investment and export earnings
*Poor cash flow for businesses
*Poor liquidity (not enough money to run business on daily basis)
Recovery or
Expansion *Occurs when GDP starts to rise (after slump)
*National income increases
*Gradual increase in consumption, investment, exports and employment

3) Four ways businesses cope with a recession

1. Cost Reduction:
-cutting energy and lighting bills
-alternative suppliers with cheaper prices
-cheaper premises to help improve cash flow
-cutting staff if necessary

2. Price Reductions:
-To increase and sustain sales
-Public are more careful with spending therefore lower prices are favorable

3. Non-Pricing Strategies:
-Re-packaging
-Special offers
-Exceptional after-sales care for customers

4. Branding:
-Customer loyalty to a brand helps maintain sales during economic instabilities
-When exchange rates aren’t favorable, price elasticity of demands for exports remains high therefore isn’t affected

5. Outsourcing:
-Competitive price advantage if produced overseas therefore increasing profits


4) Growth through improved quality of factors of production occurs when businesses invest in key resources of the economy:
Capital goods – greater investments lead to greater economic activity which in turn attracts more business in the future.
Education & Training – of workforce increases productivity and competitiveness worldwide.
Health Technology – improved health care promotes a healthier workforce, minimizing absences and increasing overall productivity.


5) Ways in which labour force of a country can change:
Changes in demography – lower birth rate as well as earlier retirement rate creates smaller workforce and vice versa.
Changes in participation rates – measures self-employed versus employed, government incentives can promote higher participation rates by, for example, lowering income tax. Women returning to or starting work has also led to higher participation rates.
Changes in net migration – measures immigration (those entering a country for work purposes) against emigration (those leaving a country for work opportunities). A larger workforce helps raise productivity of economy.


6) Barriers to growth in LEDC’s:
-Lack of good infrastructure in both communications and transport systems
-Lack of skilled labour force as well as technical knowledge
-Rapid population growth leads to lack in resources to feed the larger communities
-Indebted poor countries are required to pay back these huge loans, leaving little money for investment and growth