Cost-Push Inflation

AAA

DEFINITION of 'Cost-Push Inflation'

A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

INVESTOPEDIA EXPLAINS 'Cost-Push Inflation'

Cost-push inflation develops because the higher costs of production factors decreases in aggregate supply (the amount of total production) in the economy. Because there are fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase (inflation).

VIDEO

Loading the player...
RELATED TERMS
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship ...
  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Supply-Side Theory

    An economic theory holding that bolstering an economy's ability ...
  4. Profit Margin

    A ratio of profitability calculated as net income divided by ...
  5. Aggregate Supply

    The total supply of goods and services produced within an economy ...
  6. Demand-Pull Inflation

    A term used in Keynesian economics to describe the scenario that ...
RELATED FAQS
  1. How does the strength of the IPO market affect the drugs sector?

    The strength in the IPO market is an important indicator of liquidity, risk appetite and innovation in the drugs sector. ... Read Full Answer >>
  2. When has the United States run its largest trade deficits?

    In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a ... Read Full Answer >>
  3. How does the bond market react to changes in the Federal Funds Rate?

    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
  4. Which is more important to a nation's economy, the balance of trade or the balance ...

    There is no question the composition of a country's balance of payments is more important than its balance of trade. This ... Read Full Answer >>
  5. What are the ethical arguments against government subsidies to companies like Tesla?

    The ethical argument behind government subsidies is that they should be put into place to help industries that will, in turn, ... Read Full Answer >>
  6. How can tariffs cause inefficiencies in domestic industries?

    Any government regulation naturally creates inefficiencies in a pure supply and demand marketplace. When it comes to the ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  2. Options & Futures

    The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.
  3. Economics

    Stagflation, 1970s Style

    Find out how Milton Friedman's monetarist theory helped bring the U.S. out of the economic doldrums.
  4. Stock Analysis

    The Top Performing Airlines Right Now

    Learn about the airline industry and its top-performing companies. Understand these top-emerging airlines and why they have taken more market share.
  5. Investing

    How to Protect IRAs from Higher Interest Rates

    Rising interest rates don’t have to translate into investment losses in an IRA. Here's how you can protect your investments.
  6. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  7. Economics

    What Does Infrastructure Mean?

    Examples of infrastructure include mass transit, communication, sewage, water and electric systems, plus roads, bridges and tunnels.
  8. Economics

    Calculating the GDP Price Deflator

    The GDP price deflator adjusts gross domestic product by removing the effect of rising prices. It shows how much an economy’s GDP is really growing.
  9. Economics

    What's a Centrally Planned Economy?

    A centrally planned economy is one where the government controls the country’s supply and demand of goods and services.
  10. Economics

    Why The Dollar’s Strength Can Continue

    Overall, the U.S. dollar has rallied this year, with the Dollar Index (DXY) now up by roughly 8 percent year-to-date, but the gain hasn’t been steady.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!