How do real business cycle theorists go about explaining the sources Essay

How do real business cycle theorists go about explaining the sources of business cycles What are their main conclusions - Essay Example Under the technical innovation, RBC models were developed with the aid of a method called calibration. (Quiggin, 2009). Sources of Business Cycle In 1986, Edward Prsescott, argued in an article that business cycles in USA, after the World War II resulted from the random changes in the business sector productivity. He justified his argument by proving that upswings in economic activity resulted from an above average growth rate of productivity while downswings resulted from a below average growth rate of productivity. In doing so, Prescott openly challenged the then prevalent notion that business cycles were triggered by monetary and financial disturbances (Chatterjee, 1999). There are numerous ways of measuring total output and one such way is to measure the total value added in all the domestic firms. The total output tends to change when productivity of workers changes or the effectiveness of the equipments used increases. Thus an increase in the effectiveness of workers and equipm ent leads to the value-added and is known as total factor productivity (TFP). TFP increases majorly as a result of improvements in technology and increase in worker productivity. TFP can also change when the price of an imported raw material changes or when new products are developed through investments in Research and Development (R&D) or when natural calamities destroy agricultural output (Chatterjee, 1999). When the TFP increases, it signals to the firms that they can benefit immensely from hiring more labor and installing more equipment. To make good use of such opportunities, firms invest heavily in buildings, equipment and hire a lot of workers. Additional income is generated in the economy and the overall output rises and people tend to consume more. These favorable trends in macroeconomic variables such as consumption and investment are used by RBC theorists to explain a boom (Chatterjee, 1999). There are other sources of fluctuations in the RBC, such as changes in taxes and government spending, tastes, government regulation (such as laws to protect the environment and minimise wastage by factories), terms of trade and energy prices. When government spending increases such as expenditure on infrastructure and transfer payments, firms are encouraged to set up production plants and increase economic activity, and consumption of households also increases. Investment, government spending and consumption are the elements of aggregate demand and they are directly related to output: an increase in these elements results in an increase in the overall output of an economy. The graph below shows this as an outward shift of the aggregate demand (AD) curve from AD to AD1, with the corresponding increase in output from Q to Q1 (McGrattan, 2006). In RBC theory, technological distrubances are discussed at length because the fluctuations caused by technological disturbances resemble the actual economic fluctuations a lot. According to Kydland and Prescott’s mod el, when households respond optimally to changes in technology, fluctuations occur (McGrattan, 2006). In a traditional business cycle, consumption and leisure move in opposite directions: when one increases, the other decreases. During the boom period, consumption

Marketing strategy assignment Essay Example | Topics and Well Written Essays - 1000 words

Marketing strategy assignment - Essay Example Without the accurate market information, introduction of a new product is likely to fail. This step ensures that the company confirms the actual state of the consumer market (Ferrell, 2012). It actualizes what the market really needs, the features desired, pricing, motivation to buy and distribution channels. These are important aspects in the decision making process. The research conducted on the market revealed that the market was eagerly waiting for the introduction of the new product mainly to be used in social places such as bars, restaurants and offices. Timing This is the second stage in the marketing process that ensures all elements in the marketing process are integrated. The production of the new product should be complete before it is a launched to avoid loss of sales and credibility in the product (Ferrell, 2012). There have been numerous cases in history where the marketing of a new product has failed owing to the fact that the product manufacturing lags behind the laun ch of the new product. This explains the reason why the company was not willing to take chances with the manufacture of the Toeopener that is why a number of units were produced before the product was launched. Capacity The company should ensure that it has the required resources in terms of inputs and personnel to keep up with the manufacturing process if the introduction of the Toeopener is successful. Testing The new product has to be tested in the market to ensure that its features are in line with the customers’ need (Ferrell, 2012). This is establishes whether the customers are willing and able to pay the set price. Additionally, it ensures that the distributors are comfortable to sell and market the product. Distribution The company... The company decided to come with a clear marketing process to ensure successful sales for the new product in the Canadian market. To begin with, there are various reasons why the introduction of a new product in the market.Marketing research is the first step in the introduction of a new product. Without the accurate market information, introduction of a new product is likely to fail. This step ensures that the company confirms the actual state of the consumer market.The new product in the market mainly targeted to be used in social places with frequent activity and a high number of visitors. The first segment that is targeted by the introduction of the product is homeowners who would like to have an easier time while opening doors in their homes. However, this may be the smallest segment, as most homeowners prefer opening and closing their doors normally. Bars are the second segment in the consumer market. This is because bars have high numbers of clients and the Toeopener makes ope ning the door efficient and easier for them. The third segment is the restaurant owners who find the device highly convenient since they also have a high number of clients. The Toeopener also minimizes the spread of germs across surfaces in the restaurants since no one gets to handle the doorknob or handle using their hands. The final segment of clients is offices that have a high number of visitors and a high level of activity. It is much easier for the workers to open the door while carrying a pile of files.