What economic phenomenon is described when input prices increase and firms raise prices to maintain profit margins?

The phenomenon described occurs when the costs of production inputs, such as labor, raw materials, or energy, rise significantly. In response to these increased expenses, firms often raise their prices to protect their profit margins. This situation is referred to as Cost Push inflation.

Cost Push inflation specifically highlights that the rise in the overall price level is driven by increasing costs faced by producers, rather than by increased demand for goods and services. When production costs go up and firms pass those increases onto consumers, the aggregate supply can shift to the left, leading to higher prices for consumers while the level of output may decrease.

In contrast, Demand Inflation would occur if the demand for goods and services exceeds supply, causing prices to rise due to increased consumer purchasing power or economic growth. Monetary Inflation relates to an increase in the money supply, which can lead to general price level increases due to spending, but does not necessarily focus on input costs. Supply and Demand is a fundamental economic model that explains price movements based on the relationship between the quantity of goods supplied and the quantity demanded, without emphasizing specific causes related to cost changes.