The spelling of the term "cost push" is represented phonetically as /kɒst pʊʃ/. "Cost" is spelled with a "c" and an "o," pronounced with an open "o" sound, followed by an "s" and a "t." "Push" is spelled with a "p," a "u" pronounced with a short "uh" sound, an "s," and an "h." The term refers to an economic concept where an increase in production costs results in increased prices of products or services.
Cost push refers to a macroeconomic concept where inflation is primarily driven by an increase in the costs of production. This occurs when the prices of inputs such as labor, raw materials, or energy rise, causing overall production costs to escalate. Consequently, companies are forced to pass on these higher costs to their consumers by increasing the prices of their goods or services. As a result, the general price level of the economy increases, leading to inflation.
Cost push inflation can be caused by various factors, including an increase in wages due to labor union demands, higher prices of imported raw materials, a rise in energy costs, or changes in government policies such as taxes or regulations that impact production expenses. These upward pressures on costs cause a leftward shift in the aggregate supply curve, reducing the level of output and increasing the overall price level in the economy.
This type of inflation is considered undesirable as it erodes people's purchasing power and reduces the overall welfare of individuals and businesses. It can also lead to a decrease in consumption and investment, negatively impacting economic growth.
In summary, cost push is a term used to describe the phenomenon when the general price level increases primarily due to a rise in production costs, ultimately leading to inflation in the economy.
The word "cost push" is a compound term, combining the words "cost" and "push". Here is the etymology of both words:
1. Cost:
The word "cost" originated from the Latin word "constare", which means "to stand together". In Old French, it evolved to "coste", referring to the cost or expense of something. Eventually, it entered Middle English as "coste", which retained the meaning of expense or price.
2. Push:
The word "push" has a Germanic origin. It was derived from the Middle English word "puschen", which means "to thrust or push". This Middle English term came from the Old French word "pousser", which has the same meaning.
When combined, "cost push" refers to a situation where costs or expenses are pushing or increasing the price of goods or services.