Write a 350- to 700-word analysis assessing how 1 of the following major economic events influenced supply, demand, and economic equilibrium in the US economic activity:

  • Rapid price increases, such as caused by the 1973 oil embargo or the aftermath of a major hurricane
  • Dramatic employment drops, such as the combined impact of the 2006 housing bubble burst and the subsequent Great Recession
  • Crippling interest rates by the Federal Reserve, such as those of the 1975 – 1985 time period
  • Collapse of the Soviet Union in 1991 and the end of the Cold War, and the “peace dividend”
  • The dot-com bubble from 1994 to 2000, and the subsequent dot-com crash

Cite at least 2 academically credible sources. The use of charts and tables to illustrate data is highly encouraged.

Format your assignment according to APA guidelines. 


Assessing the Dot-Coms Bubble and Subsequent Crash

Assessing the Dot-Coms Bubble and Subsequent Crash

            Dot-coms from 1994 to 2000 were meant to change the world.  They were characterized by high valuations that were not worthwhile in the long run. During the tech boom or bubble, internet-related companies used speculation to influence the stock market (Goldfarb & Kirsch, 2019). They were optimistic that the massive supply and adoption of the internet would lead to massive growth.  Increased investments in tech companies saw the rise of stock equity valuations in the late 1990s.  The bull market featured an enormous growth in equity market values.

The Fad based investing contributed majorly to the bubble. Increased venture capital financing on new businesses influenced the growth as well.  Since the dot-coms hardly made profits, the bubble kept rising.  Internet use was growing as investors ignored a cautious approach and thought that financing startups was more lucrative.  The desire to “get big fast” led to organizations flouting financial responsibility. As capital markets channeled many finances into the venture, organizations intensified their marketing campaigns for brand awareness and tried to outweigh their competitors.  Marketing budgets spiked tremendously. As a result, the bubble caused an irrational exuberance due to poor monetary plans and policies (Goldfarb & Kirsch, 2019).  Therefore, the dot-com bubble is associated with investors losing money, and many internet-related organizations going bust. Price line, eBay, and Amazon are amongst the few companies that survived the bubble. Post the bull market of the 1990s, equities shifted to a bear market, whereby many organizations lost significant amounts of their investments.

               Even though commercialization of the internet and technological advancement materialized to a boom of capital growth in the United States, the contest between startup companies and high tech standard-bearers saw the dot-com bubble enter a burst.  The stock market surge led to speculations, easy capital, cheap money, and market overconfidence (Morris & Alam, 2008). Venture capitalists were not keen on making investment decisions so long a company had “.com” they were willing to invest.  Traditional fundamentals of investment were ignored because valuation centered on profits and earnings only.  Some companies preferred initial public offerings to pose fierce competition or rivalry for investors. After 2000 the stock market started to lose its value (Morris & Alam, 2008). Dotcom companies became cash strapped, and investment capital decreased significantly. Publicly traded dot-com companies closed doors while others merged because investment capital had depleted.  Some of the organizations filed for bankruptcy.

              Dot-Com Bubble Burst is attributable to obliviousness towards cash flows. The network’s increased value was not directly proportional to an expanded series of nodes, as many internet companies thought.  The network did not generate money and profits as they had hoped.  Even with increased demand for the internet, the United States economy suffered economically due to the overvalued stocks (Morris & Alam, 2008). The use of high multipliers, accounting errors, and centering on unnecessary metrics drained finances that would have strengthened internet stocks. The investment bond market weakened as well.


Goldfarb, B., & Kirsch, D. A. (2019). Bubbles and crashes: The boom and bust of technological innovation. Stanford University Press.

Morris, J. J., & Alam, P. (2008). Analysis of the Dot-Com Bubble of the 1990s. Available at SSRN 1152412.