cost push inflation.

Discussion in 'Economics' started by morganist, Jul 28, 2009.

  1. cost push inflation. do you believe it exists? .
  2. Stosh


    I was in business in the '70s and "cost push" was generally blamed for some of the severe inflation of that era. The other cause was called "demand pull" inflation. Without studying it at the time, I accepted that explanation. Later I have learned that inflation has many causes in the short run, but I believe that in the big picture over the long term, it comes down to supply and demand for goods and services (and money). Stosh
  3. what do you mean does it exist? yes it exisits.
  4. achilles28


    Yea, thats supply-side inflation.

    Factor input costs go up (land, labor, capital, energy), which drives up product costs.

    Notably, energy is the largest contributor to "Cost-push" inflation and like Stosh said, happens after an energy shortage.

    Demand-side inflation (credit bubbles) can look like cost-push inflation when a plummeting dollar drives higher commodity - especially energy - prices.

    Labor shortage if people die. Land shortage, perhaps after a population explosion or war. And capital shortage with an embargo.

    Inflation is just increases in the money supply.

    What we understand as cost push inflation and demand pull inflation are just the market in action.

    AS demand and supply interact price and output changes. This does not mean inflation, deflation or anything like that is taking place.
  6. achilles28


    You don't know what you're talking about.
  7. Support your statement. If you can...........
  8. There are only two kinds of inlfation:
    1. market derived (ie supply/demand of a commodity or service) changes. 2. monetary derived inflation (exchange rate).

    Thats it. All inflation is part of these two types.

    Ex. Supply/Demand

    ice cream costs 1/gallon, supply drops or demand increases (not both for the sake of the example), but demand stays the same, now ice cream costs 2/gallon. Duh, inflation. Take an Econ intro course sometime. You don't trade do you? Think stock price increases due to good news or quarterly reports relative to other stocks that didn't get such great reports.

    I don't think anyone needs an example for monetary inflation. (oops, my dollars cant buy as much gold as in the past, or imports cost more, I should have exchanged for euros/yaun/yen since the dollar inflated relatively).
  9. Maybe you need to RETAKE the course. Do you not even realize there is a complicated supply chain just to sell ice cream in a store? Do you think it just appears on the store shelf?
  10. Actually, he does and you're confused.

    Inflation & deflation are the manipulations of money supply. This is separate from basic Supply & Demand.
    #10     Jul 29, 2009