Supply shock

Supply shock,

Definition of Supply shock:

  1. Reduction in the productive capacity of an economy, caused either by the reduced availability of factor inputs or by a reduction in their productivity.

  2. A positive supply shock increases output causing prices to decrease due to a shift in the supply curve to the right, while a negative supply shock decreases production causing prices to rise. Supply shocks can be created by any unexpected event that constrains output or disrupts the supply chain, including natural disasters and geopolitical developments such as acts of war or terrorism. A commodity that is widely perceived as the most vulnerable to negative supply shocks is crude oil because most of the world's supply comes from the volatile Middle East region.

  3. A supply shock is an unexpected event that suddenly changes the supply of a product or commodity, resulting in an unforeseen change in price. Supply shocks can be negative, resulting in a decreased supply, or positive, yielding an increased supply; however, they're often negative. Assuming aggregate demand is unchanged, a negative (or adverse) supply shock causes a product's price to spike upward, while a positive supply shock decreases the price.

How to use Supply shock in a sentence?

  1. A positive supply shock increases output causing prices to decrease, while a negative supply shock decreases output causing prices to increase.
  2. A supply shock is an unexpected event that changes the supply of a product or commodity, resulting in a sudden change in price.
  3. Supply shocks can be created by any unexpected event that constrains output or disrupts the supply chain, such as natural disasters or geopolitical events.
  4. Crude oil is a commodity that is considered vulnerable to negative supply shocks due to its volatile Middle East location.

Meaning of Supply shock & Supply shock Definition