Cost-Push Inflation

Cost-Push inflation is a type of inflation caused by increased production costs, which lead to higher prices for goods and services. For example, prices for raw materials or wages increase, which lead businesses to raise the prices of their products and services. As long as demand for goods and services remains constant, these increased production costs are passed down to consumers, resulting in higher prices. Additionally, changes in production costs can also be considered supply shocks, which disrupt the normal supply chain and contribute to cost-push inflation. Cost-push inflation is generally regarded as negative because it is driven by rising production costs rather than increased aggregate demand, leading to higher costs for consumers without corresponding economic growth.