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Class 12 Tuition > Learn Economics > â??If cost rises price are bound to increaseâ??. In...
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â??If cost rises price are bound to increaseâ??. In the context of this statement explain the causes of cost-push inflation.

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Causes of Cost-push inflation: A sustained increase in the prices of goods and services brought about by rising input costs and a decrease in aggregate supply. There are a number of factors that can contribute to cost-push inflation including increases in: 1. Wage rates. 2. Prices of raw materials (possibly...
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Causes of Cost-push inflation: A sustained increase in the prices of goods and services brought about by rising input costs and a decrease in aggregate supply. There are a number of factors that can contribute to cost-push inflation including increases in: 1. Wage rates. 2. Prices of raw materials (possibly as the result of currency depreciation). 3. Corporate taxes. For inflation to be cost-push in nature, increases in input prices must affect a large proportion of producers, forcing up the general price level as demand stays constant in the short-run. This applies very well to the price of oil. read less
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