A supply shock is a sudden change in supply that causes
the equilibrium price and quantity of a good or service to change. An adverse supply
shock is one that causes supply to go down. This is something like an oil embargo. If
all of a sudden the US economy can get much less oil, the supply of pretty much
everything will fall and prices will rise.
By contrast, a
beneficial supply shock causes supply to go up. This would be what would happen if a
new invention caused the price of producing a product to go down suddenly. This would
increase supply and the sale price of the good would decrease.
No comments:
Post a Comment