A number of people have explained why decompositions of inflation into "profit" and "wage" components don't tell us anything about the *cause* of inflation.
I have tried to make the point for my students with the simplest possible toy model.
The Model:
Inflation p at time t is purely determined by money supply ("demand") m: p(t) = m(t).
Prices are weighted sum of factor prices (wage rate and rental rate): p(t) = (1-a)*w(t) + a*r(t).
Wages are sticky, and determined by past inflation: w(t) = p(t-1).
