How can a sudden external shock, such as a natural disaster, impact consumer confidence and the supply and demand equilibrium in an economy?

A sudden external shock, like a natural disaster, can greatly affect consumer confidence and change the balance of supply and demand in an economy. When a disaster strikes, people often feel uncertain and worried about their safety and finances, leading them to spend less money. This decrease in consumer spending means there is less demand for goods and services, which can hurt businesses. At the same time, the disaster might disrupt production and supply chains, making it harder for companies to provide products. For example, if a hurricane damages a factory, the reduced supply of its products combined with lower consumer confidence can lead to higher prices and less overall economic activity.