What is the difference between demand-pull and cost-push inflation?

What is the difference between demand-pull and cost-push inflation?

Demand-pull inflation and cost-push inflation are two different types of inflation that occur due to different factors.

Demand-pull inflation is caused by an increase in aggregate demand in the economy. This can happen when there is an increase in consumer spending, government spending, or investment. When the demand for goods and services exceeds the available supply, prices tend to rise. This type of inflation is often associated with periods of economic growth and can be seen as a sign of a healthy economy.

On the other hand, cost-push inflation is caused by an increase in production costs. This can happen due to factors such as an increase in wages, raw material prices, or taxes. When the cost of production rises, businesses may pass on these increased costs to consumers in the form of higher prices. Cost-push inflation is often associated with periods of economic downturn or supply shocks, such as an increase in oil prices.

In summary, demand-pull inflation is caused by increased demand in the economy, while cost-push inflation is caused by increased production costs.