Cost-push inflation occurs when a shortage of supply of labor, raw materials or capital, often in “push-like” sudden shock. The demand remains the same, but since there are fewer goods or services, the supplier can charge more per unit. However, this can only occur if demand for the end product or service is inelastic.
Cost-push inflation occurs when an economy experiences a negative cost shock. Diagrammatically, the aggregate supply curve shifts upward and to the left, causing the price level to rise, and aggregate demand to contrac