The EzyEducation website uses cookies to help ensure we give you the best experience.
If you continue without changing your settings, we assume that you are happy to receive all cookies on the EzyEducation website.
Please refer to our Privacy and Cookies Statement to

find out more.

Continue

Supply side shock

A sudden, unexpected and significant change in the cost of a factor of production, such as changes in wage rate, commodity prices or taxes, that causes a shift in the aggregate supply curve.

 

In the diagram below this displays a negative supply shock in which causes the supply curve to shift inwards and this creates a negative output gap. This could of been caused by an increase in the price of a key raw material used in the production process to produce this type of good.

 

Forgot your password?