DQS1: Impact of unrest on the economy

Impact of unrest on the economy
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Social, political and labor unrests affect a country’s economy as there is a disruption of production, and foreign direct investment is most likely to decline. Consequently, unrest affects the prices of goods and services through the market forces of demands and supply. Domestic production may also decline, causing a supply shortage which may persist in the economy if not offset by cheaper imports. Reduced supply combined with increased demand for goods in turn leads to price hikes especially on food and petroleum products. Political unrests in the Middle East have led to price hikes for petroleum products in the domestic and international market causing increased production costs (Fitzgerald, 2013).
Unrest causes market disequilibrium because there will be a fall in supply from domestic suppliers leading to a leftward shift in the supply curve. However, market demand tends to be the same in the short run and for there to be equilibrium there is an increase in prices and fewer goods in the market. Over time, consumers may cut their consumption leading to a fall...