What is the term for inflation that happens when production costs rise?
Answer (2)
The type of inflation that occurs when the cost of producing goods and services increases is called Cost-Push Inflation. This happens when producers have to pay more for things like raw materials, electricity, transportation, or labor, and they pass on those costs to consumers through higher prices.Let’s take a local example. In the Philippines, when global oil prices rise, the cost of diesel and gasoline also increases. Since trucks, buses, and jeepneys all use fuel to transport goods and people, their operational expenses rise. As a result, transportation fares go up, and the price of goods in stores also increases because delivery costs are higher. This is a clear case of cost-push inflation.Another example is when minimum wage increases. While this is good for workers, businesses may raise their prices to cover the higher wages they must pay. This again can lead to cost-push inflation.This kind of inflation is tricky to manage because it’s not caused by too much demand (like demand-pull inflation), but by rising costs. If the government tries to stimulate the economy during cost-push inflation, it can make things worse. That’s why correct diagnosis is important.
: The term is cost-push inflation.Cost-push inflation occurs when the overall price level rises due to increases in the cost of production. This can be caused by higher prices for raw materials, wages, or energy. As production becomes more expensive, businesses pass these costs on to consumers in the form of higher prices.
