Cost-push inflation has direct affects on many things in an economy; first one has to understand why such a thing occurs. Cost-push inflation occurs when a company's costs rise and to compensate they have to put their prices up. For example, if a company's worth rises because of the demand for the service or product that the company produces, then the price of the product or service will rise. This happens when more people desire a good or service the company has to raise the price because of the balance the faster production rate that has to meet the demand of the people, thus creating inflation of prices. These prices not only affect the price of one business but if the market is being stimulated very rapidly then the prices also go up, therefore making prices increase to a higher level then before.

Cost-push inflation is also caused by successful negotiations for an inappropriate increase in wages. This, of course, means that without such wage settlements there would be no such inflation because suppliers would be satisfied with a lower price than they can receive for their goods or services provided only that workers would be willing to accept lower wages. Such behavior in suppliers is, of course, not likely unless wages can be held to less than employers are willing to pay.

As shown in these examples, demand push and cost-pull are very close in how they affect an economy. Both theories are employed in our everyday life and affect us greatly.

Another potential leading indicator of cost-push inflation is commodity prices. Economists track the prices of various commodities, from oil to gold. As the prices of inputs such as copper rise, the prices of outputs such as home wiring and plumbing will soon follow. To date there is no consensus as to which commodities to track and their relative weights (importance) in a commodity price basket. Although commodity prices do respond positively to increases in demand, they are also subject to non-economic influences such as mining strikes and oil embargoes. For this reason commodity prices can undergo large swings for non-demand reasons, and their individual price spikes may not be a prolonged contributor to future inflation. Furthermore, raw materials represent only about 10% of total production costs, influenced by labor, which accounts for approximately 70% of the cost of production in the United States.

As said the previous paragraphs, cost-push has the chain reaction which is called the wage price spiral. The wage price spiral affects many of the players in the came production. Because of the increase in price due to the increase demand either the wage earners or profit receivers (neglecting for the moment ot

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