An increase in the prices of factor inputs may result in

Step 1: Analyze the question The question asks what an increase in the prices of factor inputs (land, labour, capital, raw materials) may cause. Factor inputs are the costs of production.

Step 2: Explain the concept

• When the cost of producing goods rises (higher wages, rent, interest, or raw material prices), producers' costs go up.
• To protect their profits, producers raise the prices of their goods and services.
• Inflation that comes from rising production costs is called cost-push inflation.

Step 3: Check each option

• A. Demand-pull inflation: Caused by excess aggregate demand ("too much money chasing too few goods"), not by higher input prices. ✗
• B. Stagflation: A combination of high inflation, high unemployment, and stagnant growth. Rising input costs can contribute to it, but it is not the direct, defining result. ✗
• C. Open inflation: Price increases that are not suppressed by government controls. It describes how visible the inflation is, not its cause. ✗
• D. Cost-push inflation: Directly caused by increases in the cost of production, including factor input prices. ✓

Step 4: Answer The correct option is D. cost-push inflation.

Exam tip: Match the cause to the label:

• Demand-pull means demand pulls prices up (too much spending).
• Cost-push means costs push prices up (expensive inputs, such as higher wages or fuel prices).

In Nigeria, a rise in diesel or petrol prices raises production costs and often leads to higher prices for goods, which is a good real-life example of cost-push inflation.