The second situation which causes inflation is the one which production costs are rising ,production costs includes raw materials , energy and wages when workers find they can't afford the goods and services they need owing to the fact the prices are too high , they seek wage increase more usually ; however, they arenot and hence price rise . This is referred to as cost- push inflation .
A third cause of inflation maybe government policy . Government can affect the level of prices by controlling or regulating them , or by reducing taxes on goods and services and accordingly , keeping prices down .
Alternaly , if govenment doesn't regulate prices or if it imposes higher taxes it push prices up.