Question

My industry is Optometry:

7. What are the impacts of the macroeconomic business cycle on demand in your industry? Is demand in your industry procyclical or countercyclical? Explain. If demand in your industry is insensitive to the business cycle, explain why this is so?

8. What are any major impacts of the macroeconomic business cycle on supply for your industry – i.e. how might different phases of the business cycle impact your industry’s ability to acquire inputs such as labor, capital or materials? Explain. Note: Do not discuss responses to demand side changes but look for impacts that are independent of demand changes.

Answer 1

7. Optometry can be categorized as an industry which faces a less than elastic demand. In other words, the demand for the services offered by this industry is driven by an essential need rather than a need for comfort or luxury. Therefore, it is not likely to be affected much by the macroeconomic cycles and should be insensitive to business cycles.

8. Now the supply for this industry may be affected by macroeconomic business cycles. Suppose the macroeconomic activity is higher, i.e., tending towards full employment, all the resources (labor, capital and materials) would be deployed in producing goods and services that have elastic demand (and, as said above, Optometry is not one of them). This would lead to a shortage of resources that can be employed in supply of Optometry. So we can say that the supply for this industry will suffer when macroeconomic activity is higher. On the other hand, when macroeconomic activity is lower, i.e., at less than full employment, resources are available for supply to Optometry industry but they won't go into them as the demand for Optometry services would still be at a normal level. So we can say that when macroeconomic activity is lower there is no increase in supply for this industry.