[1] This cycle is believed to be accounted for by time lags in information movement, affecting the decision making of commercial firms.
Firms react to the improvement of commercial situation through the increase in output through the full employment of the extant fixed capital assets.
As a result, within a certain period of time (ranging between a few months and two years) the market gets ‘flooded’ with commodities whose quantity becomes gradually excessive.
The demand declines, prices drop, the produced commodities get accumulated in inventories, which informs entrepreneurs of the necessity to reduce output.
Yet, after this decrease takes place one can observe the conditions for a new phase of growth of demand, prices, output, etc.