This document discusses recessions and market economics. It defines a recession as the economy shrinking for two consecutive quarters with decreasing GDP. It explains that a recession occurs when there is unwillingness to buy, leading industries like airlines and hotels to cut costs through layoffs and salary reductions. This decreases demand for other goods and can lead the economy into a depression if the recession lasts over 6 months. While developing economies like India may see slowing growth, most developed economies are currently in a recession with negative GDP growth rates. Ultimately, a recession stems from both market economics and a state of mind where fear decreases spending.

1. What is Recession…
Is it …
Market Economics
OR
a State of Mind…

2. Before understanding Recession,
We need to understand the Market Economy
• TWO STAGES OF MARKET ECONOMY
I) GROWING Market Economy &
II) DECLINING Market Economy
• TWO FACTORS OF MARKET: -
I) DEMAND &
II) SUPPLY

3. A- I) GROWING MARKET ECONOMY
Starting Point = Willingness to buy

4. A- 2) DECLINING MARKET ECONOMY
Starting Point = Unwillingness to
buy

5. B) TWO FACTORS OF MARKET :
DEMAND & SUPPLY
Producer wants his demand always to be high
Consumer wants his buying cost always to be low
Usually we think;
Demand = Quantity (actually..)
Demand = Price. This is because.
Price decides the Quantity of Sales;
Competitive Price = More Demand
In-competitive Price = Less Demand
Producer Price Actually, Demand is the price at ;
Consumer Price
Consumer is Ready to Buy
&
Producer is Ready to Sell

6. What is Recession…
Technically,
Recession is the economy shrinking for two
consecutive quarters (= 6 months) with a decrease in
the GDP (=Gross Domestic Product)
GDP = Value of all the reported goods and services
produced by the people operating in the country
GDP = MONEY VALUE OF {C + I + G + (X – M)}
C = Consumables, I = Gross Investments, G = Govt. Spending,
X = Exports, M = Imports

7. What is Recession…
GDP is a good indicator of economy; Other indicators
could be;
- Unemployment Rate
- Consumption Rate
- Actual Personal Income
- Etc..
If GDP is growing, then market is growing due to
increased demand;
Note: If the Recession continues for more then 2 quarters,
(>6 months) then we go through “DEPRESSION” Economy;

8. What is Recession…
(Explain me in layman’s term)
Created fear in people
Terrorists’ People cancelled their travel plans
Attack on
11th Sept. Resulted in low occupancy rates
in U.S. …. Airlines & Hotel Industries badly hit
Airline & Hotel Industries offered discounts,
gift coupons, to attract people
But, still, no improvement in occupancy rate
Airline & Hotel Industries started
“Cost Reduction” activities

9. What is Recession…
(Explain me in layman’s term)
Airline & Hotel Industries started
“Cost Reduction” activities
ii] Lay off people iii] Salary reduction to
i] Reduce No. of flights
“Not laid off people”
Low or No income to
They became careful due
spend and buy goods In flight meals reduced
to the fear of loss of job
Demand for other goods Meals supplying Started saving money
come down Company got the hit instead of spending
Catering company now, Demand for other
lays off people Goods come down

10. What is Recession…
Currently, GDP Growth
Most of the developing
Slow Down Rate Down; But,
Economies like INDIA, Stage; Not yet Still expected to be
China in Recession Around 6% in India
Most of the developed
Economies like US, Currently, GDP Growth
Japan, Germany, etc in Recession Rate Negative

11. So, what is Recession…
… It is a sweet
COMBINATION of
Market Economics
&
State of Mind,
which go hand in
hand…..

12. HOPING THISTIME RECESSION
VANISHES SOON SO THAT
INDIA & REST OF THE WORLD
GETS BACK TO PROGRESSION
&
INDIA POSTS A GDP GROWTH
RATE OF 8% TO 10%
( THOUGH THE EXPERSTS SAY
IT WILL LAST TILL Q3 OF 2012)

13. What is Recession…
Created & Published
by
Amit Jhunjhunwala
Email:
amit@careeralliances.co.in