Inflation

Cost-Push Inflation

Cost-push inflation occurs when prices rise because production costs increase, such as raw materials and wages. The demand for goods is unchanged while the supply of goods declines due to the higher costs of production. As a result, the added costs of production are passed onto consumers in the form of higher prices for the finished goods.

​Example of Cost push Inflation

If the price oil or natural gas increases, it's going to lead to an increase in gas prices at the pump, or the gas that is needed to heat your home.

​Demand Pull Inflation

Demand-pull inflation can be caused by strong consumer demand for a product or service. When there's a surge in demand for a wide breadth of goods across an economy, their prices tend to increase. While this is not often a concern for short-term imbalances of supply and demand, sustained demand can reverberate in the economy and raise costs for other goods; the result is demand-pull inflation.