negative supply shock definition
Supply shock. A supply shock is an event that suddenly changes the price of a commodity or service. It may be caused by a sudden increase or decrease in the supply of a particular good. This sudden change affects the equilibrium price. A negative supply shock will raise prices and shift the aggregate supply curve to the left. A negative supply shock can cause stagflation due to a combination of raising prices and falling output. A positive supply shock will lower the price of said good and shift the aggregate supply curve to the right. A positive supply shock could be an advance in technology which makes production more efficient, thus increasing output.