Supply Shock

Supply shock means a sudden change in the availability of goods, services, or resources. In simple terms, a supply shock happens when supply suddenly becomes much higher or lower than expected. Supply shocks are important because they can affect prices, inflation, production, and economic growth. A negative supply shock can push prices higher and reduce output, while a positive supply shock can lower prices. For example, if a conflict disrupts oil production, the world may face a negative oil supply shock. A supply shock is not the same as a demand shock. A supply shock starts from changes in production or availability, while a demand shock starts from changes in buying behavior.