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1. A new environmental protection law that requires firms to reduce their emissions of pollutants. firm pass the on the added costs to customers in the form of higher prices
2. A drought that destroys crops. The reduction in food supply pushes up food prices.
3. An increase in union aggressiveness. This pushes up wages and the prices of the goods produced by union workers.

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1. decreases in oil prices
2.lower union pressure
3. a great crop season

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Examples of positive supply shocks are decreases in oil prices, lower union pressures, and a great crop season

Favorable supply shocks result in:
• Lower costs
• Lower prices
• Higher real output or real GDP
• Lower unemployment

Favorable supply shocks shift the aggregate short run supply curve up
↑SRAS | ↑rGDP | ↓ UR | ↓ PL
↓SRAS | ↓rGDP | ↑ UR | ↑ PL

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Index of consumer expectations:
This is a direct measure of expectations,
based on a survey conducted by the University of Michigan’s Survey
Research Center.
Increased optimism about future economic conditions
among consumers suggests increased consumer demand for goods and
services, which in turn will encourage businesses to expand production
and employment to meet the demand.

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The rise of electric cars over the past few years is a real-world example of a demand shock. It was hard to predict the demand for electric cars and, therefore, for their component parts, for example, lithium battery.
From 2010, the rise in the demand for electric cars from companies like Tesla Motors increased the overall market share of these cars to 3 percent, or roughly 2,100,000 vehicles. The demand for lithium batteries to power the cars also increased sharply, and somewhat unexpectedly.
Lithium is a limited natural resource that is difficult to extract and found only in certain parts of the world. Production has been unable to keep up with the growth in demand, and so the supply of newly mined lithium remains lower than it would be otherwise. The result is a demand shock.
Over the period from 2004 to 2014, demand for lithium more than doubled. Then, demand exploded for not only electric vehicles but battery-powered mobile phones and tablets.
Since 2014, the price of lithium has more than doubled again. The cost has been passed onto the consumer, raising the cost of electric cars in a positive demand shock environment.

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Example of favourable demand shocks include:              Interest rate cuts                   Tax cuts                         Stimulus checks         

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Example of favourable demand shocks include:              Interest rate cuts                   Tax cuts                         Stimulus checks         

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Affect on output and prices in long and short run

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Affect on output and prices in long and short run

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In the short run, the price level increases and output decreases, also known as stagflation, as the new short-run aggregate supply curve meets the aggregate demand curve at a new intersection that is to the upper left of the old intersection. But, as the economy adjusts, the aggregate demand curve shifts until the economy is again in long- run equilibrium at a lower price level with output unchanged.

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The stock market reflects expectations about future economic conditions because the stock market investors bid up prices when they expect companies to be profitable an increase in the stock prices indicates that investors expect the economy to grow rapidly, a decrease in stock prices indicates that investors expect an economy slow down

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1. Global pandemic
2. Central bank rate increases
3. Stock market crashes

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reaseon : when demand is shocked to decrease, we expect both the quantity supplied and consumed, as well as the price of the transactions to decrease.

the price of the transactions decresases because as consumers want to consume less, they are willing to pay less.

the quantity supplied and consumed decreases because, as the prices decrease, suppliers are willing to produce less.

To balance such a negative demand shock, governments may be inclined to lower interest rates, cut taxes, or increase spending to reverse a self reinforcing negative spiral.

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Tax cuts in short run : Primarily through their impact on demand. Tax cuts boost demand by increasing disposable income and by encouraging businesses to hire and invest more.

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Tax cuts in short run : Primarily through their impact on demand. Tax cuts boost demand by increasing disposable income and by encouraging businesses to hire and invest more.

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Technological advances that improve production efficiency will shift a supply curve to the right. The cost of production goes down, and consumers will demand more of the product at lower prices. Computers, televisions and photographic equipment are good examples of the effects of technology on a supply curve.

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Gross Domestic Product (GDP)

The gross domestic product is widely accepted as the primary indicator of macroeconomic performance. The GDP, as an absolute value, shows the overall size of an economy, while changes in the GDP, often measured as real growth in GDP, show the overall health of the economy.

The GDP consists of four components, namely:

1. Consumption

2. Investment

3. Government Expenditure

4. Net Exports