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What is demand pull inflation? Write four causes responsible for it.

 Demand pull inflation is the type of inflation where demand plays an important role in inreasing the price.

The main causes of it are:

1) Black economy: when there is black money in the system, people tend to demand more for luxuries instead of necessities. Due to this other shopkeepers/manufacturers raise the price. Sometimes small retailers also increase the price  by see the other shopkeepers in order to earn more.

2) Injection of money in the economy: when government injects the money in the economy through the bonuses and benefits to the government employees, the demand increases and thus the price also increases

3) Infrastructural development: infrastructural development in terms of education and imployment generation also raises the income and this also increases demand

4) Less suply of goods: When there is less supply of goods and more demand then also price increases

5) festive season: this is anothe kind of cause. As we know that the demand during festive season increases but shopkeepers create artificial scarcity and sell goods at a price higher than the usual price.

(Consider shopkeepers as manufacturers)

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 it is type of inflation where demand is more than supply

  causes of it are; 

  increase in money

  increase in population

  increase in money supply

  increase in public expenditure

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Demand-pull inflation is a type of inflation that occurs when the price level increases due to a greater demand for a good than there is supply available.

There are five causes for demand-pull inflation:

  1. A growing economy: When consumers feel confident, they spend more and take on more debt. This leads to a steady increase in demand, which means higher prices.  
  2. Increasing export demand: A sudden rise in exports forces an undervaluation of the currencies involved.
  3. Government spending: When the government spends more freely, prices go up.
  4. Inflation expectations: Companies may increase their prices in expectation of inflation shortly.
  5. More money in the system: An expansion of the money supply with too few goods to buy makes prices increase.

 

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