Question

During the recession, prices fall even if supply increases.discuss. ​

Answer 1

Answer:

A supply side recession occurs when an economy is pushed into recession through a supply side shock. For example, a rapid increase in the price of oil would cause an increase in the cost of production and shift the short run aggregate supply curve to the left.

Explanation:

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Answer 2

Explanation:

Zahra and Prabhjot, let me explain both of you the reason behind this. Look recession is a period when there exists a slow-down in the general economic activities. Inflation, unemployment, production, demand all remain low.

Now, in such a situation, it won't be profitable for the supplier to sell the good, since the market price is low and the demand is also low. On the other hand, even if the supplier aim to sell the good at lower price, then also it won't have much impact on demand, since people don't have affinity for the good (either they are unemployed or they don't have the purchasing power,etc.). Thus, the price will fall, irrespective of whether the supply is increased or it remains stable. Hence, in the situation of recession, price becomes unresponsive to change in supply.

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