Which situation would lead to an increase in cost-push inflation?

An increase in cost-push inflation occurs when the overall price levels rise due to an increase in the costs of production for goods and services. Higher wages for workers in a key industry significantly contribute to this phenomenon. When wages increase, businesses face higher labor costs, which can lead them to raise the prices of their products to maintain profit margins. This wage increase in essential sectors, especially if it represents a large portion of overall production costs, can ripple through the economy, leading to a general rise in prices across various industries.

In contrast, increased competition in the market tends to lower prices as businesses compete for customers, which can mitigate inflationary pressures. A decreased demand for luxury goods would typically lead to lower prices in that segment, not an increase in inflation. Similarly, lower taxes designed to increase consumer spending may boost demand, but they don't inherently increase production costs, which is a key factor in cost-push inflation. Therefore, the correct answer identifies the direct link between rising production costs and inflationary trends in the economy.