Why, in general, do shocks force people to make changes? Give at least two examples from your own experience.

Shock is created when the speculated future returns are not met with the actual returns. If the actual return is lower than expected, it will cause negative demand or supply shock. If the actual return is higher than expected, it will create positive demand or supply shock.

Since a shock creates a gap between the demanded quantity and supplied quantity. , an adjustment is required to eliminate this gap and reach the equilibrium point.

People make changes to adjust this gap by changing the output and employment level. In this way, they reach the equilibrium position at which the quantity supplied by them is equal to the quantity demanded by the consumers.

1. Decrease in demand for cars:The coronavirus pandemic created a negative demand in the automobile sector. The actual demand for cars was less than the speculated demand for them.

As a result, the inventory of cars increased in the automobile sector. Since prices are sticky in the short-run, the automobile industry adjusted the difference by decreasing output, resulting in the loss of employment to many of its workers.

2. Increase in demand for OTT platforms: The same pandemic created a positive demand shock for online streaming platforms. During the pandemic, many cities faced complete lockdown, and people were advised to self isolate themselves.

Thus, the demand for OTT platforms increased more than the speculated demand. As a result, more and more platforms were launched to cover this gap of actual demand and speculated demand. The launch of new OTT platforms in the short run increased the employment level also.