INDUSTRIES AND ECONOMIC GROWTH
Discuss why you would not expect all industries to have a similar relationship to the economy. Give an example of two industries that have different relationships to the economy. Please discuss your findings and how the economy will affect them differently.
Economic performance does not affect all industries on the same level. Most sectors perform and thrive better when there is growth in the economy. This performance is known as pro-cyclical since there production tends to move in line with the level of economic prosperity. Some industries are countercyclical, as they are prosperous during economic stagnation, but during commercial success, they decline in production rates.
The fast-food industry is an example of the pro-cyclical since their success highly depends on economic performance. When the economic performance drop’s some people, lose jobs due to lay-offs, and some undergo wage deduction. Customers cut on spending, and so they opt for food-stuffs that can be cheaply acquired, making the fast-food industries to make loses.
During a low economic performance, while some companies are making loses some make profits such as the discount retailers. Consumers buy discounted goods which are mostly at more economical prices making the industries to increase their performance level. However, during economic growth, customers switch to expensive branded products and sales of the discount retailers tend to lower.