What holidays, as they had more money to spend,

What is
the economy?

The economy
is the amount of money being created within a country, due to
production/consumption within the country and the supply of money. This can be
affected by many factors such as wages and consumer spending to name a few. The
economic cycle is the natural change between economic growth and recession. GDP
(gross domestic product), employment levels, interest rates and consumer
spending all contribute to the determining of the specific stage of the
economic cycle. The economic cycle changes every quarter of a year.

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A period of
economic 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 in
economic growth – people have more money to buy more things, which increases
demand, so more labour is required (creating jobs), not only within the
organizations themselves, but also for machinery firms, who need to hire more
labourers to keep up with the demand.


A recession
is a period of economic decline. This is when the GDP has been declining for 2+
quarters (¼ = 3 months/12 weeks).  During
recession, there are some negative effects, such as:

People start
saving money as opposed to spending – this could lead to the demand for
services and goods falling – leading to: Businesses selling less, due to
consumers’ lack of disposable income – and therefore, making less profit. Businesses
making less profit could possibly cause many workers being made redundant because
of budget cuts – due to the business attempting to maximise profit.


In the
period of growth, which was from 1995-2008, EasyJet had high demand, as people
were planning more holidays, as they had more money to spend, due to the period
of economic growth. The high demand meant that EasyJet could expand its
organisation and they bought 200 new planes in 1995. Additionally, as the
economy was growing, EasyJet could buy a lot of fuel, which meant that they
could fly to even more, further destinations, which could further increase
their profits due to them having a wider range of destinations than their
competition, so more people would want to fly with them. In June 2008, EasyJet
reported an increase of passengers by 19.5% – which is undeniable proof of a
growth in the economy.

During the
2008-2010 period of recession, EasyJet’s demand stays high, as they are a
budget 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 materials
went up, which would reduce the profits of EasyJet. Since EasyJet needs these
materials to continue doing business, and are still paying, despite the rise in
costs, inelastic demand is present. Ultimately, although the business EasyJet
is getting is decent, they aren’t making the same amount of money as they would
in a period of economic growth.


EasyJet’s period of growth, they would need suppliers for goods such as: fuel,
food & drinks, paper, airplanes and shuttles. EasyJet would be looking for
the most inexpensive supplier to make sure their expenses are as low as
possible, 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 to
economic boom, raw materials such as fuel were cheaper, which means that even
more flights could be made possible – maximising EasyJet’s profits. Also,
labour is a very important part of supply, as every business would need labour
to operate successfully and efficiently. During an economic boom/growth period,
more jobs should become available, as a business may be expanding – in
EasyJet’s case, as their flights are available at more airports due to
expansion, then more staff such as flight attendants and ticket stall clerks
are required, creating more jobs. Furthermore, in times of economic growth,
EasyJet should offer incentives to ensure that they have the necessary number
of employees.

During a
period of economic recession, the acquisition of raw materials may prove to be
quite difficult, as they would be considerably more expensive to purchase for
EasyJet. Additionally, as the supply has diminished, EasyJet may find it hard
to obtain the raw materials. As the supply couldn’t keep up with the high
demand, prices rose – this caused the redundancy of many EasyJet workers,
because they could not afford to keep paying many employees’ wages, because
they need to purchase supplies, and they needed to make sure their profits were
high as possible. Also, the price of fuel is also one of the most important
expenses – as it is what the planes run on, without it, EasyJet would not be
able to fulfil their purpose of providing a flight service to their customers
as their planes won’t be able to take off.


Lots of
large companies have become globalised since the 80’s. Globalisation is when an
organization expands itself into foreign economies, due to exportation of
goods/foreign investment. A reason for a company becoming globalised would be
not only lower costs, but also larger customer databases. Additionally, getting
products from countries which are currently developing makes globalisation more
cheap and easier.