A period of great market instability which is initiated by a supply side shock. The instability continues for some time as the cobweb diverges due to demand that is more inelastic than supply. It may require government intervention to re-establish a stable equilibrium position.
A good harvest in period 1 means supply rises to Q1, so that prices fall to P1. If producers plan their period 2 production under the expectation that this low price will continue, then the period 2 supply will be higher, at Q2. Prices therefore fall to P2 when they try to sell all their output. As this process repeats itself, oscillating between periods of low supply with high prices and then high supply with low prices, the price and quantity trace out a spiral. This all occurs because the slope of the supply curve is less than the absolute value of the slope of the demand curve, then the fluctuations increase in magnitude with each cycle, so that prices and quantities spiral outwards. This is called the unstable or divergent case.