The scenario
An external supply shock (e.g., natural disaster) shifts the supply curve, creating excess demand; the price adjusts to restore equilibrium, but at a higher price and lower quantity.
What is in this drawing
Read the decisions behind it.
01
Represented supply shock as an additive disturbance to the supply block
02
Modeled market clearing using a sum junction computing excess demand (demand minus supply with shock)
03
Treated price adjustment as a feedback controller that responds to excess demand
Useful for analyzing the dynamic effects of any exogenous shift in supply or demand on equilibrium price and quantity, including policy interventions or supply chain disruptions.
More like this