Chapter 10, Problem 6P

To determine

Examples of adverse supply shock and beneficial supply shock and discuss the impact.

Introduction:

Adverse Supply shock: Adverse Supply shock is an occurrence which causesan increase in the cost of production and reduces the supply at a particular price level shifting the supply curve leftward.

Beneficial Supply shock: Beneficial Supply shock is an occurrence which causesa decrease in the cost of production and increases the supply at a particular price level shifting the supply curve rightward.