Cost Push Inflation Keynesian Diagram. Cost push inflation is the decrease in the aggregate supply of goods and services stemming from an increase in the cost of production. The cost push inflation can also be illustrated with the aggregate demand and supply curves.
For in stance by an administrative order the govern ment may hike the price of petrol or diesel or freight rate. The cost of production increases when there in increase in prices of the factors such as increases in wages raw materials indirect tax etc. One of the important causes of price rise is the rise in price of raw materials.
One of the important causes of price rise is the rise in price of raw materials.
Cost push inflation occurs when there is a decrease in supply of goods and services. It is the cost factors that pull the prices up ward. This means that according to keynesian rising production costs will lead to inflation. The cost push inflation can also be illustrated with the aggregate demand and supply curves.
