supply shock

(noun)

An event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good.

Related Terms

Examples of supply shock in the following topics:

  • Shifting the Phillips Curve with a Supply Shock

    • Aggregate supply shocks, such as increases in the costs of resources, can cause the Phillips curve to shift.
    • Stagflation caused by a aggregate supply shock.
    • The stagflation of the 1970's was caused by a series of aggregate supply shocks.
    • In this example of a negative supply shock, aggregate supply decreases and shifts to the left.
    • Give examples of aggregate supply shock that shift the Phillips curve

  • Impacts of Policies and Events on Equilibrium

    • One type of event that can shift the equilibrium is a supply shock.
    • A negative supply shock (sudden supply decrease) will raise prices and shift the aggregate supply curve to the left.
    • A positive supply shock (an increase in supply) will lower the price of said good by shifting the aggregate supply curve to the right.
    • One extreme case of a supply shock is the 1973 Oil Crisis.
    • A supply shock shifts the aggregate supply curve.

  • Reasons for and Consequences of Shift in Aggregate Supply

    • In economics, the aggregate supply shifts and shows how much output is supplied by firms at different price levels.
    • In economics, aggregate supply is defined as the total supply of goods and services that firms in a national economy produce during a specific period of time.
    • If labor or another input suddenly becomes cheaper, there would be a supply shock such that supply curve may shift outward, causing the equilibrium price in to drop and the equilibrium quantity to increase.
    • A supply shock could be caused by changing regulations or a sudden change in the price of an input, among other reasons.
    • Explain shifts in aggregate supply and their impact on the economy

  • Introduction to Inflation

    • The reasons for inflation depend on supply and demand.
    • The reason for decreases in supply are usually related to increases in the prices of inputs.
    • One major reason for cost-push inflation are supply shocks.
    • A supply shock is an event that suddenly changes the price of a commodity or service.
    • (sudden supply decrease) will raise prices and shift the aggregate supply curve to the left.

  • Recessions

    • Recessions generally occur when there is a widespread drop in spending (an adverse demand shock).
    • This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, or the bursting of an economic bubble .
    • Supply-side economists may suggest tax cuts to promote business capital investment.

  • Shifts in investment due to shocks

    • A positive demand shock increases the demand (not the quantity demanded), while a negative demand shock decreases the demand.
    • Demand shocks may originate from tax rates, money supply, and government spending.
    • Demand shocks directly impact investment.
    • Positive demand shocks increase consumer spending.
    • Increased spending leads to higher prices and therefore higher quantity supplied, inducing firms to invest in further productive capacity such as machinery or land.

  • Changes in Supply and Shifts in the Supply Curve

    • The change in price will result in a movement along the supply curve, called a change in quantity supplied, but not a shift in the supply curve.
    • Changes in supply are due to non-price changes.
    • The supplier will supply less at each quantity level.
    • A shift in supply from S1 to S2 affects the equilibrium point, and could be caused by shocks such as changes in consumer preferences or technological improvements.
    • Distinguish between shifts in the supply curve and movement along the supply curve

  • Changes in Demand and Supply and Impacts on Equilibrium

    • Supply shifts can also be a result of technological advances, over-utilization or consumption, globalization, supply-chain efficiency, and economics.
    • For example, the discovery of a new gold deposit, acts as a shock to the supply of gold, shifting the curve right.
    • Due to the demand curve sloping downward and the supply curve sloping upwards, they inadvertently will cross at some given point on any supply/demand chart.
    • In this supply and demand chart we see an increase in the supply provided, shifting quantity to the right and price down.
    • Illustrate how changes in supply or demand impact the market equilibrium

  • Supply Schedules and Supply Curves

    • A supply schedule is a tabular depiction of the relationship between price and quantity supplied, represented graphically as a supply curve.
    • A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.
    • The supply curve is a graphical depiction of the supply schedule that illustrates that relationship between the price of a good and the quantity supplied .
    • The supply curves of individual suppliers can be summed to determine aggregate supply.
    • One can use the supply schedule to do this: for a given price, find the corresponding quantity supplied for each individual supply schedule and then sum these quantities to provide a group or aggregate supply.

  • Introducing Aggregate Supply

    • Aggregate supply is the total supply of goods and services that firms in a national economy plan to sell during a specific time period.
    • The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises.
    • In the long-run, the aggregate supply is graphed vertically on the supply curve.
    • The long-run aggregate supply curve is static because it is the slowest aggregate supply curve.
    • Aggregate supply is the total quantity of goods and services supplied at a given price.