Kostnaðarbólga

Kostnaðarbólga, also known as cost-push inflation, is a type of inflation that occurs when the prices of goods and services rise due to increases in the cost of wages and raw materials. This is in contrast to demand-pull inflation, which is caused by an increase in aggregate demand. Several factors can contribute to cost-push inflation. One significant factor is a rise in wages. When labor costs increase, businesses may pass these higher expenses onto consumers in the form of higher prices. Another common cause is an increase in the price of essential raw materials, such as oil. A surge in oil prices, for instance, can lead to higher transportation costs for businesses, which can then be reflected in the prices of a wide range of products. Supply chain disruptions, natural disasters, or geopolitical events can also reduce the availability of goods, leading to higher prices as demand outstrips supply. Government policies, such as increased taxes or environmental regulations, can also raise production costs for businesses. When costs rise across many sectors of the economy simultaneously, it can lead to a general increase in the price level, characteristic of cost-push inflation. This can create a challenging economic environment as businesses grapple with higher expenses and consumers face reduced purchasing power.