What is Push cost inflation?

Provision of a short, direct explanation for economic concepts is not always easy, but fortunately the theory push theory can be explained 500 or less. The economy is largely about comparing various thought schools and the main supporter of the inflation model is the British economist named John Maynard Keynes. Keynes believed that the health of the country's economy depending on the combination of government and private inspections. Under his economic model, cost inflation occurs whenever production costs suddenly increase, but the demand for the product or service remains the same. These additional costs must be handed over to the consumer, which in turn increases the retail price. The retail price of the product is often based on the current wages of the workers produces this, so at any time the workers receive an increase in salary, and production costs are also increasing. The company cannot afford to absorb this increase internally, so the added production costs are handed over directly to consumers. Since his own wages consumeThe solers may not increase, the increase in price is the form of cost inflation. The same dollar that the product could buy last week can now buy only 90% of this product this week. This is what economists would call a reduction in expenditure.

Another cause of cost inflation is to increase the costs of materials or services provided by the manufacturer. If the foreign economy collapses, the costs of importing materials from this country can increase exponentially. The cost of supplying materials to the production plant can also increase dramatically during the energy crisis or extended strike. The manufacturer can decide toorb some of these added expenses to maintain a competitive price, but not all of them. The result could be an increase in the retail price and demonstration of the theory of inflation of costs.

There is also the same but opposite economic event called Inquiry-PullLace , which other economists, in addition to Keynes, tend to support as the main cause of most inflation of the consumer price. Unlike inflation of cost inflation, demand inflation is affected by the demand for the product, not necessarily available. For example, when gasoline tributaries happen during the holidays during the holidays, the price is likely to increase due to the higher demand for the driver's holiday product, not only the outflow and the flow of oil production. Within the theory of an inflation of a dependent tadder, gasoline prices would increase due to a higher wage for oil workers or an increase in the price for barrels of unprocessed oil.

The argument against the increase in minimum wages often includes a reference to cost inflation. If the basic wage of workers increases, manufacturers may feel obliged to pass this increase to consumers in the form of higher prices. Since increasing the minimum wage may not be beneficial for workers who already receive higher salaries, their expenditure force may be reduced as a result of these pricesThe a. Theory of Push costs suggests that this scenario is possible, but historical increase in federal minimum wages has not led to long -term inflation, as other gainful wages can also gain an increase. The growing tide tends to lift all ships.