What Is Cost-Push Inflation?

Cost-push inflation is when the price of goods and services goes up because the cost of the things used to make them has gone up. For example, if the price of oil goes up, then the company that makes gasoline will have to charge more for their product. This increase in prices gets passed on to consumers, who then have to spend more money.

In economics, cost-push inflation is caused by an increase in aggregate costs, which leads to a corresponding increase in prices. It can be triggered by a variety of factors, such as an increase in input prices (e.g., raw materials or energy), wages, or taxes. Once these costs are passed on to consumers in the form of higher prices, they can cause a general rise in the price level, which is known as inflation.

While cost-push inflation is generally considered to be undesirable, it is not always bad for the economy. For example, if cost-push inflation is caused by an increase in wages, it can lead to higher levels of spending and economic growth. However, if it is caused by an increase in the price of oil, it can lead to lower levels of spending and economic growth.

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