Which of the following events is a positive demand shockA.Increase in housing prices due to rapid development in the countryB.Floods lead to reduction in foodC.The development of new technologies improves the efficiency of productionD.Developed countries' restrictions on imports from developing countries
Question
Which of the following events is a positive demand shockA.Increase in housing prices due to rapid development in the countryB.Floods lead to reduction in foodC.The development of new technologies improves the efficiency of productionD.Developed countries' restrictions on imports from developing countries
Solution
The event that represents a positive demand shock from the options provided is A. Increase in housing prices due to rapid development in the country.
Here's why:
A demand shock is a sudden event that increases or decreases demand for goods or services temporarily.
A. Increase in housing prices due to rapid development in the country: This is a positive demand shock because the rapid development in the country increases the demand for housing, which in turn increases the prices.
B. Floods lead to reduction in food: This is a negative supply shock, not a demand shock. The floods reduce the supply of food, but they don't directly affect the demand for food.
C. The development of new technologies improves the efficiency of production: This is a positive supply shock. The new technologies increase the supply of goods by making production more efficient, but they don't directly affect the demand for those goods.
D. Developed countries' restrictions on imports from developing countries: This is a negative demand shock for the developing countries, because it reduces the demand for their goods. But it's not a positive demand shock.
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