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LSDefine
Simple English definitions for legal terms
cost-push inflation
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A quick definition of cost-push inflation:
Cost-push inflation is a type of inflation that happens when the cost of producing goods and services goes up. This can be caused by things like higher wages for workers, higher prices for raw materials, or higher taxes. When the cost of producing things goes up, businesses may raise their prices to make up for the extra expenses. This can lead to a general increase in prices across the economy, which means that the value of money goes down.
A more thorough explanation:
Cost-push inflation is a type of inflation that occurs when the cost of producing goods and services increases, leading to a rise in prices. This is different from demand-pull inflation, which occurs when there is too much demand for goods and services, leading to a rise in prices.
One example of cost-push inflation is when the cost of raw materials, such as oil or steel, increases. This can cause the cost of producing goods that use these materials, such as cars or buildings, to increase. As a result, the prices of these goods may also increase.
Another example is when there is a shortage of skilled workers, causing wages to increase. This can lead to higher production costs for businesses, which may then pass on these costs to consumers in the form of higher prices.
These examples illustrate how cost-push inflation can occur when there are increases in production costs, such as raw materials or labor, which then lead to higher prices for goods and services.