Feedback is the situation in which the output in the past process will influence the output of the present or future events. This is known as a Feedback Situation. It is a cause and effect relationship which has a chain reaction. If the input is changed the output is also going to change.
Feedback is responsible for market volatility.
It is the output of an event which is fed back to change or amend the next event. It is a two-way flow of action and it has its presence in all types of environment. It is present in any industry as well as the economy.
Feedback can also be explained as the information that is sent prior to the happening of the event. It is because everyone is well informed about the occurrence of the event.
As we see in our daily life that when we buy a certain product there are feedback forms available for the customers. They need to fill the form so that the company can know what the actual buyers think after consuming the product.
These kinds of feedbacks are at the last stage of the industry. While the product is manufactured there are many internal feedbacks which are taken from the employees itself. This helps in making the amendments at a very initial stage and costs can be lowered.
Types of feedbacks
There are two types of feedbacks:
1. Positive Feedback: In Positive Feedback a positive ongoing change in the input leads to a positive ongoing change in the output as well.
E.g. In a company manufacturing biscuits if the machinery is increased the natural reaction is that the production of biscuits is also going to increase. This is known as Positive Feedback
2. Negative Feedback: In Negative Feedback is a situation in which a positive ongoing change in the input leads to a negative ongoing change in the output.
E.g. If the machinery which is installed is not utilized to the maximum capacity then, even though the input is more the output will not show signs of increment.
It is applicable to trading market as well. It is the situation where the investors sell when the market is low and buys when the market is high. This is the situation which is seen in stock market trading known as Feedback situation.