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    Positive and Adverse Supply Shock

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    Please answer the following question:
    What is a supply shock? Explain the differences between a beneficial and an adverse supply shock.

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    Solution Preview

    Supply shock is "an unexpected event that changes the supply of a product or commodity, resulting in a sudden change in its price" (Investopedia, 2012).

    Adverse supply shocks "include things like increases in oil prices, a drought that destroys crops, and aggressive union actions. In general, adverse supply shocks cause the price ...

    Solution Summary

    Positive and adverse supply shocks are determined.