Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy.

Does cost push increase inflation?

Definition: Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods. ... The opposite effect of this is called demand pull inflation where higher demand triggers inflation.

What is cost-push inflation with examples?

The most common example of cost-push inflation occurs in the energy sector – oil and natural gas prices. You and pretty much everyone else need a certain amount of gasoline to fuel your car or natural gas to heat your home. Refineries need a certain amount of crude oil to create gasoline and other fuels.