demand shocks

A demand shock is an unexpected event that causes a sudden change in the demand for goods and services. If demand increases suddenly, businesses may struggle to keep up, leading to higher prices and shortages. Conversely, if demand drops unexpectedly, businesses may have excess supplies, causing prices and production to fall. These shocks can result from factors like technological changes, policy shifts, or external events, impacting the economy’s stability. Essentially, demand shocks disrupt the usual flow of consumer interest, prompting immediate adjustments in economic activity.