When there is an increase in demand for products and services, demand-pull inflation, a particular type of inflation, happens. This kind of inflation is often brought on by an increase in the inflation rate, technical advancements, or general economic expansion. Cost-push inflation happens when rising input costs force enterprises to pass along the cost to customers. Several things could cause this to happen. For instance, a tightening labor market may result in higher labor costs or the price of materials beginning to rise.
What is demand-pull and cost-push inflation?
The reduction in the overall supply of products and services brought on by an increase in the cost of production is known as cost-push inflation. Demand-pull inflation is an increase in total demand, which the macroeconomy's four sectors—households, businesses, governments, and foreign buyers—divide into.
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