Cost Push Inflation Diagram With Explanation. Cost push inflation occurs when overall prices increase inflation due to increases in the cost of wages and raw materials. Diagram showing cost push inflation.
Cost push inflation is when supply costs rise or supply levels fall. Cost push inflation occurs when there is a decrease in supply of goods and services. Cost push inflation can lead to lower economic growth and often causes a fall in living standards though it often proves to be temporary.
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.
In the above diagram we see a shift or decrease in the aggregate supply curve from as1 to as2 resulting in a lower real gdp and higher prices from p1 to p2. In the above diagram we see a shift or decrease in the aggregate supply curve from as1 to as2 resulting in a lower real gdp and higher prices from p1 to p2. Causes of cost push inflation. Cost push inflation occurs when there is a decrease in supply of goods and services.
