Which situation is most likely to lead to cost-push inflation?
A. A sudden increase in consumer demand
B. Lower taxes for corporations
C. A typhoon destroying agricultural crops
D. Decreased wages across all industries
Answer (1)
The correct answer is letter C. A typhoon destroying agricultural cropsCost-push inflation happens when the cost of production rises and companies pass those costs on to consumers in the form of higher prices. Natural disasters like typhoons can destroy crops, leading to lower supply of goods like rice, vegetables, or fruits. As supply goes down but demand stays the same or increases, prices go up.In the Philippines, typhoons frequently damage agricultural areas. When this happens, the prices of onions, tomatoes, and rice often spike. Even transportation costs can rise due to damaged roads and fuel supply issues. This drives inflation not because of higher demand, but because the cost to produce or deliver these items has increased—a classic case of cost-push inflation.
