Supply shock
 | This article is missing information about historical examples of supply shocks. (August 2022) |
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A supply shock is an event that suddenly increases or decreases the
equilibrium price of the good or service or the economy's general price level
.
In the short run, an economy-wide negative supply shock will shift the
1973 Oil Crisis is often used as the exemplar case of a supply shock, when OPEC
restrictions on production and sale of petroleum resulted in fuel shortages throughout the developed world.
In the short run, an economy-wide positive supply shock will shift the aggregate supply curve rightward, increasing output and decreasing the price level.technology shock) which makes production more efficient, thus increasing output.
Technical analysis
The slope of a demand curve determines how much the price level and output respond to the shock, with more inelastic demand (and hence a steeper demand curve) causing there to be a larger effect on the price level and a smaller effect on quantity.
See also
- Commodity price shock
- Demand shock
- Technology shock
References
- ^ ISBN 978-1-111-82234-7
Bibliography
- Czech, Brian, Supply Shock: Economic Growth at the Crossroads and the Steady State Solution, (Gabriola Island, Canada, 2013)