Question

How does demand pull inflation differ from cost push inflation

Answer 1

Demand pull inflation and cost push inflation are both two main causes of inflation. They differ because the cause of the inflation is different.

 

EXPLANATION

Demand pull inflation and cost push inflation are both the main causes of inflation. Demand pull inflation is the most common cause of inflation. Demand pull inflation will happen when the supply of a product or a service is overwhelming, so the demand for a specific good or service outspaces the supply. The customers need the product, so the customers are willing to pay a higher price. They have no choice to buy the product or service at a higher price point.

The second one that causes inflation is cost-push inflation. The cost-push inflation will happen if the demand for goods and services stays the same, but the supply constraints increase the price of the services and goods.  

The definition of inflation itself is the increase in the price of goods and services over time. The increase in the cost of our daily living is caused by inflation. People will have to earn more money to buy food, fill the gas tank, and get a haircut as the year goes by.

Inflation lowers the power of purchasing in every currency unit. For example, in the United States, there will be a decrease in value on the dollar. Year by year, the value of the dollar is different. The money will buy less if the price of services and goods increase. If people do not earn more over time, then people have to lower the standard of living.

LEARN MORE

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KEYWORD: inflation, demand pull, cost push

Subject: English

Class: College

Subchapter: Inflation

Answer 2

The demand cost-push inflation is different from cost-push inflation because the demand-pull inflation arises when the prices of goods and services increase due to increase in demand while the cost-push inflation arises when the prices of goods and services increase due to an increase in production costs.

Further Explanation:

Demand-pull Inflation: This type of inflation arises due to increase in demand increasing and goods.As the demand and prices are inversely proportional. The increased demand puts pressure on the prices which leads to an increase in prices of services and goods. The monetary measures like high-interest rates and fiscal policy that involves low government expenditure and high taxes are used to curb demand-pull inflation.

Cost-push inflation: This type of inflation arises due to an increase in the production cost of services and goods. The producer raises the price of services and goods because the cost of production can rise. They transfer the high production cost to the consumer. The cost production includes labor cost and material cost.high-interest deflationary fiscal policy and monetary policy that involves high rates and reduces consumer spending are used by the government to curb inflation.

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Answer details:

Grade: Middle School

Subject: Economics

Chapter: Inflation

Keywords: Difference between demand-pull inflation and cost-push inflation , economics.