Which type of inflation occurs when production costs rise and businesses raise prices to maintain profit?
A. Demand-pull inflation
B. Asset inflation
C. Cost-push inflation
D. Core inflation
Answer (2)
The correct answer is letter C. Cost-push inflationCost-push inflation happens when the cost of producing goods increases, and businesses pass on the extra cost to consumers by raising their prices. This could be due to more expensive raw materials, fuel, labor, or electricity.A real example in the Philippines was during the oil price hikes in 2022. When diesel and gasoline prices went up, transport costs increased. Farmers and delivery companies paid more to bring goods to the market. Eventually, prices of vegetables, fish, and even jeepney fares went up. That’s cost-push inflation in action—it’s not about people buying more, but about businesses needing to cover higher expenses.
The correct answer is C. Cost-push inflation.Cost-push inflation happens when the costs of production (like wages, raw materials, or energy) increase. To keep their profit margins, businesses raise the prices of their goods and services, which leads to overall inflation. This type of inflation is driven by rising costs rather than increased demand.Other OptionsA. Demand-pull inflation - Happens when demand for goods and services exceeds supply, pushing prices up.B. Asset inflation - Refers to rising prices in assets like real estate or stocks, not general consumer prices.D. Core inflation - Measures inflation excluding volatile items like food and energy, showing underlying inflation trends.
