Monday, March 14, 2011

Demand Shock Explained

What Does Demand Shock Mean?
A sudden surprise event that temporarily increases or decreases demand for goods or services. A positive demand shock increases demand, while a negative demand shock decreases demand. Both positive and negative demand shock have an effect on the prices of goods and services. Investopedia
Do we have a demand shock? Don't ask me. However I am coming to the conclusion that economists who use the term refer to some new psychology that has taken over the consumer.

OK. So consumers buy less, skip the fluff. What bothers economists is that consumer shifts are sudden.  Their models do not handle suddeness.

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