Chapter
Understanding Cost Push Theory in Rising Prices
18:27 - 21:04 (02:36)
Cost push theory explains how increased costs of labor, raw materials, and other factors in production affect the prices of final products. For instance, the decreased production of lumber due to pandemic-sparked expectations resulted in higher prices for building a new house.
Clips
The cost push theory and the demand pull theory are two different approaches to understanding inflation.
18:27 - 19:50 (01:23)
Summary
The cost push theory and the demand pull theory are two different approaches to understanding inflation. The first focuses on the increase in costs of labor and materials, whereas the second looks at the demand for goods and services as the driver of inflation.
ChapterUnderstanding Cost Push Theory in Rising Prices
EpisodeWhat Causes Inflation?
PodcastStuff You Should Know
When companies are running at full production capacity, an increase in the cost of raw materials, such as lumber or fuel, downstream in the production process can lead to higher prices for finished products.
19:51 - 21:04 (01:13)
Summary
When companies are running at full production capacity, an increase in the cost of raw materials, such as lumber or fuel, downstream in the production process can lead to higher prices for finished products. This is known as the cost push theory of rising prices.