Question

How does demand-pull inflation differ from cost-push inflation?

Answer 1

Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods".

Answer 2

The main difference between cost-push inflation and demand-push inflation is that the cost-push inflation occurs due to the increase in the cost of the product, and demand-push inflation occurs due to the increase in the demand of the product.

Further Explanation:

Demand-pull inflation:

Demand-pull inflation refers to the increase in the price of the commodities due to the shortage in the supply. When the demand of a commodity exceeds the supply of the commodity, the rise in price is known as demand-pull inflation.  

Cost-push inflation:

Cost-push inflation refers to the increase in the price of the commodity because of the increase in the cost of the commodity. The cost of the commodity increases because of an increase in wages and material costs. The increase in cost will increase the price of the product. It can result in a decrease in the supply of the commodity.

Difference between cost-push inflation and demand-push inflation:

The main difference between the cost-push inflation and demand-push inflation is that the earlier one increases the price of the commodity because of the decrease in the supply of the product due to the increased cost of production. In demand-push inflation, the rise in price occurs when demand overtakes the supply. The cost of the production is not affected in demand-push inflation.

Thus, the main difference between cost-push inflation and demand-push inflation is that the cost-push inflation occurs due to the increase in the cost of the product and demand-push inflation occurs due to the increase in the demand of the product.

Learn More:

1. Learn more about the product leadership https://brainly.com/question/6610513
2. Learn more about the demand and supply https://brainly.com/question/5471118
3. Learn more about the demand https://brainly.com/question/11093180

Answer Details:

Grade: Senior school

Chapter: Inflation

Subject: Economics

Keywords: demand-pull, inflation, differ, from, cost-push, deflation, increase in price, purchasing power, demand, and supply.