Supply side of the
COST PUSH INFLATION economy
Cost of production is rising
3/30/2023 44
, COST-PUSH INFLATION
This view sees prices having to rise, as suppliers pass on increased costs to consumers
Key factors – Energy, wage Costs and import Costs
As wages rise, or as imported raw materials (and other factors) rise in price, firms will experience
increases in costs
Application to UK economy
❖Supply side shocks
❖Following Covid (lock downs, illness)- supply side of the UK and global economy are still recovering
❖Energy prices have been soaring – conflict Russia & Ukraine
❖Food/ grain: Poor harvests- impact of global warming/ drought- Spain & South Africa
❖Rising oil prices- impact on production and transportation
❖Union pressures & industrial action- higher wages demanded as expectations of high future inflation
❖Falling value of the pound- political uncertainty- mini budget and Prime Minister change- imports became
more expensive
3/30/2023 45
COST PUSH INFLATION economy
Cost of production is rising
3/30/2023 44
, COST-PUSH INFLATION
This view sees prices having to rise, as suppliers pass on increased costs to consumers
Key factors – Energy, wage Costs and import Costs
As wages rise, or as imported raw materials (and other factors) rise in price, firms will experience
increases in costs
Application to UK economy
❖Supply side shocks
❖Following Covid (lock downs, illness)- supply side of the UK and global economy are still recovering
❖Energy prices have been soaring – conflict Russia & Ukraine
❖Food/ grain: Poor harvests- impact of global warming/ drought- Spain & South Africa
❖Rising oil prices- impact on production and transportation
❖Union pressures & industrial action- higher wages demanded as expectations of high future inflation
❖Falling value of the pound- political uncertainty- mini budget and Prime Minister change- imports became
more expensive
3/30/2023 45
