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Economic shock (supply shock, demand shock)

  • November 10, 2022
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An economic shock is an unexpected occurrence that temporarily alters the economy. There can be supply shocks and demand shocks, and either can have a negative or positive impact. You can think of the toilet paper crises during the Covid pandemic as a demand shock. Without warning, the public perceived a possible shortage and reacted to it quickly, en masse, and temporarily. A plentiful growing season is a positive supply shock. For example, if the Florida orange crop is huge in a given year, consumers will see a price drop in that fruit.