ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Higher costs of production can decrease the aggregate supply (the amount of total production) in the economy.

Detailed explanation-2: -Cost-push inflation An increase in the price of domestic or imported inputs (such as oil or raw materials) pushes up production costs. As firms are faced with higher costs of producing each unit of output they tend to produce a lower level of output and raise the prices of their goods and services.

Detailed explanation-3: -Examples of Cost-Push Inflation Electric power suppliers need high levels of natural gas to create electricity. When global policies, war, or natural disasters drastically reduce the oil supply, gasoline prices rise because demand remains relatively stable even as supply shrinks.

Detailed explanation-4: -Cost-push inflation occurs when supply costs rise or supply levels fall. Either will drive up prices-as long as demand remains the same. Shortages or cost increases in labor, raw materials, and capital goods create cost-push inflation. These components of supply are also part of the four factors of production.

Detailed explanation-5: -Cost-push inflation is a rise in prices caused by a decline in aggregate supply, but aggregate demand holds firm or increases. This drives up the cost of goods and services and reduces purchasing power.