Which of the following best describes the process by which cost-push inflation is generated?
A) Increased demand for a good leads to a higher price for that good, and pushes costs up.
B) An increase in the per-unit cost of raw materials used in the production of a good reduces profits earned from selling the good. This reduces the output of the good a firm will be willing to supply at the existing price level. As the supply curve shifts leftward, the price of the good will rise.
C) Decreased demand for a good will cause the price of the good to fall. This will cause the supply of the good to fall, and the price to rise.
D) An increase in the per-unit cost of a good raises profits, and this increases the amount of output a firm will supply at the existing price level. This leads to a higher price.
Which of the following best describes the process by which cost-push inflation is generated?
A) Increased demand for a good leads to a higher price for that good, and pushes costs up.
B) An increase in the per-unit cost of raw materials used in the production of a good reduces profits earned from selling the good. This reduces the output of the good a firm will be willing to supply at the existing price level. As the supply curve shifts leftward, the price of the good will rise.
C) Decreased demand for a good will cause the price of the good to fall. This will cause the supply of the good to fall, and the price to rise.
D) An increase in the per-unit cost of a good raises profits, and this increases the amount of output a firm will supply at the existing price level. This leads to a higher price.
For unlimited access to Homework Help, a Homework+ subscription is required.