supply shocks

A supply shock occurs when there’s a sudden change in the availability of a key good or resource, disrupting normal production and causing price fluctuations. For example, a natural disaster damaging a major factory or a sudden increase in oil prices due to geopolitical tensions can limit supply. This imbalance between supply and demand often leads to higher prices and can slow economic growth. Supply shocks can be positive (e.g., a discovery of new technology that boosts production) or negative (e.g., a drought reducing crop yields). They are important because they influence inflation rates, employment, and economic stability.