The business cycle is made up for four phases: booms, downturns, recessions and recoveries. Right from demand to supply to the cost of production every aspect will depend on the phase of the business cycle. The business cycle is crucial for businesses of all kinds because it directly affects demand for their products. The external factors affecting a business comprise of such factors as technology, government, and its policies, economic forces and elements, socio-cultural factors, and international factors. The time period to complete this sequence is called the length of the business cycle. The internal factors that affect a business are such factors as employees, competitors, customers, suppliers and the culture of the organization.These are factors which business can control. It is the up and downs of our economy. Boom: high levels of consumer spending, business confidence, profits and investment.Prices and costs also tend to rise faster. There are basically three causes of business risk: 1. Such external factors are sunspots, wars, revolutions, political events, gold discoveries, growth rate of population, migrations, discoveries and innovations. A business cycle will affect all the sectors of an economy. Business Cycle Basics. External factors are things outside a business that will have an impact on its success. A boom is characterized by a period of rapid economic growth whereas a period of relatively stagnated economic growth is a recession. We will discuss the GDP in more detail in tomorrow’s lesson. During booms, the economic output increases quickly and businesses tend to prosper. A business cycle can be defined as an economic sequence that is characterized by recession, recovery, growth and decline. External factors. Economic Shock: An economic shock is an event that occurs outside of an economy, and produces a significant change within an economy. Which of the following is one of the five causes of a business cycle? One element of environmental scanning is the general economic environment. c.is used to predict changes in business cycles. Eventually, a booming economy reaches a peak point where economic growth rates start to fall, leading to an economic downturn. But ignoring obvious (and subtle) warning signs of business trouble is a surefire way to end up on the wrong side of business survival statistics. It is the up and downs of our economy. 2. Failure is a topic most of us would rather avoid. Ten Common Causes of Business Failure By Erica Olsen. Risk triggers can be internal or external. Businesses operate in an ever changing world. External Factors: The external factors emphasise the causes of business cycles in the fluctuations of something outside the economic system. d.was designed to detect external shocks. Causes of Business Cycles; 1] Help Frame Appropriate Policies. 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