Unit 38: Business and the Economic
Environment
,P1: explain the effects, of changes in the economic
environment on a selected business
,Introduction
This assignment focuses on the business of PJ Hegarty & Sons and the
Economic Environment in which they are in. It will also focus on the
business cycle of the economy and the different stages within the cycle
and how it affects the economy and the business.
,About the Business (P J Hegarty & Sons)
● This company was established in 1952 is one of Ireland's most progressive building and
civil engineering companies
● It is a profit oriented organization that is regionally based in Ireland and the United
Kingdom.
● This organization has directly employed 340+ employees since opening.
● They have an annual turnover of €350 million or £298 million.
● They focus on large, complex projects in commercial, retail, tourism, pharmaceutical,
high-tech and institutional buildings, refurbishment and civil engineering works
,Business Cycle
● This is the increasing and decreasing in the production output of goods and services in
the economy over a period of time.
● It is measured using the real gross domestic product (GDP) which is the value of goods
and services produced by an economy over a period of time and other variables.
● There are several stages within the business cycle. This includes; Growth, Peak,
Recession and Recovery. The main stages are Growth and Recession.
,Growth (Boom)
● This is the first stage of the business cycle.
● During this stage there is a high level of economic growth and the demand for
products is high which increases the production of supply.
● This further increases the sales and profits for businesses.
● The level of employment increases due to the rise in wages.
● Interest rates will increase and investment levels will be high as well.
● The importation demand from other countries are high.
,Peak
● This is the second stage in the business cycle.
● This is the maximum limit of growth that will occur in the economy.
● Every aspect is at its peaked point; for example the prices in stores.
● The country is producing at maximum output.
● Employment is at or above full employment level.
,Recession (Bust)
● This stage is the opposite of growth.
● The level of demand falls and individuals start to save instead of spending.
● The prices of products decrease in order to sell more products due to persons not
earning enough money to purchase high cost products.
● The unemployment level rises.
● Interest rates and investment falls.
● The government begins to spend more in order to stimulate demand.
,Recovery
● After the economy has reached its lowest point, action will need to be taken in order
to increase growth again.
● In order to do this, the government will decrease tax rates, interest rates may be
reduced as well.
● Every aspects which helps to build an economy begins to grow and flourish again.
, Indicators of the Economic Cycle
Indicators are signs that displays the current status of the economy and can be used to
measure how well the economy is doing.
There are 5 different indicators that are commonly used. These are:
1. Changes in Gross Domestic Product
2. Rates of inflation and deflation
3. Employment rates
4. Trade surpluses and deficits
5. Balance of payments
