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In the cost-pull sector you will likely see some genuine inflationary forces, but not to the degree people expect. The reason why goods will not all increase in price to offset labor costs is due to something called price elasticity. Price elasticity measures how sensitive consumers are to a change in price for a given good.

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A good is prices inelastic when consumer demand doesn’t change much as the prices go up or down. Something like insulin is price inelastic because as long as consumers have the money to pay for it, they will. A good is considered price elastic if it is more sensitive to a change in price. You likely won’t purchase a Big Mac if the price went.

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