Question

Give two causes of cost push inflation.

Mention two/three factors which cause cost push inflation.

Explain in brief the three causes of cost push inflation. 

Discuss any three causes of cost push inflation.

Explain any four causes of cost push inflation.

Explain in brief the main causes of cost push inflation.

Answer 1

The cost push inflation is caused by the following factors:

1. Rise in Wages: Rise in wages has been considered as the main determinant of cost push inflation. This is because in modern times, workers have organised themselves into strong trade unions, which have succeeded in getting higher wages for their members.
2. Increase in the Price of Basic Materials: Cost push inflation is also caused by increase in the prices of some basic materials, such as steel, basic chemicals, oil, etc. Since, these materials are used directly or indirectly in almost all the industries, any increase in their prices affect the whole of the economy and the prices everywhere tend to increase.
3.  Higher Taxes: Another important cause of cost push inflation is the imposition of higher taxes on commodities, like excise duties, sales tax, etc. These taxes are largely passed over by the producers to the consumers by the amount of taxes.
4. Oil Price Hike and Global Inflation: Global inflation and hike in oil prices has resulted in a higher impact of crude oil from abroad. It results in a rise in prices of diesel, petrol and other petroleum products in India.
5. Administrative Price: Administrative price refers to a price fixed by the government for essential goods. Price level in the country has also increased due to frequent hike in the administered prices like railway flights, port charges coal, steel, and goods produced by public sector industries.