What is Supply Shock?

An unforeseen event that causes the supply of a product or commodity to change, resulting in a sudden equilibrium price change of the good or service. Supply shocks can be negative (decreased supply) or positive (increased supply); however, supply shocks rarely create a positive outcome, due to their unpredictable nature. Assuming that the overall demand for a product or service has not changed, a negative supply shock will cause a price increase and vice versa.