Assume the market for Easter rabbits is currently at long term equilibrium. Assume Australia is the largest supplier of easter rabbits. A sudden explosion in the rabbit population of Australia leading up to Easter. How will the market react?
The positive supply shock for Easter rabbits will shift the supply curve outwards, while demand remains unchanged. In the short term the quantity of Easter rabbits bought will increase while the price for these rabbits will decrease. In the medium term the price and quantity will begin returning to long term equilibrium as the shock effect dampens. Finally, in the long term the Easter rabbit market returns to long run equilibrium.
PB
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