What is the Difference Between Demand Pull Inflation and Cost Push Inflation?
🆚 Go to Comparative Table 🆚The main difference between demand-pull inflation and cost-push inflation lies in their causes and impacts on the economy. Here are the key differences:
Demand-pull inflation:
- Occurs when the aggregate demand for goods and services exceeds the aggregate supply in the economy.
- Caused by an increase in demand due to factors such as expanding economy, increased government spending, or overseas growth.
- Results in higher prices because production cannot keep up with the increased demand.
Cost-push inflation:
- Occurs when the aggregate supply of goods and services decreases due to an increase in production costs.
- Caused by factors such as rising costs of raw materials, labor, or other production inputs.
- Results in higher prices as companies pass on the increased production costs to consumers.
In summary, demand-pull inflation is driven by consumer demand, while cost-push inflation is driven by higher production costs. Demand-pull inflation typically occurs when the economy is growing, whereas cost-push inflation can occur due to external factors such as supply disruptions or increases in the cost of production inputs.
On this pageWhat is the Difference Between Demand Pull Inflation and Cost Push Inflation? Comparative Table: Demand Pull Inflation vs Cost Push Inflation
Comparative Table: Demand Pull Inflation vs Cost Push Inflation
Here is a table comparing Demand Pull Inflation and Cost Push Inflation:
Feature | Demand Pull Inflation | Cost Push Inflation |
---|---|---|
Definition | Inflation that occurs due to an increase in aggregate demand | Inflation that results from a decline in aggregate supply due to external factors |
Caused by | Increase in aggregate demand, excess demand for goods and services | Increase in production costs, decrease in supply of goods and services |
Impact of Aggregate Demand | Increased aggregate demand results in demand-pull inflation | In cost-push inflation, the aggregate demand remains the same |
Factors Contributing to Inflation | Increase in money supply, government spending, foreign exchange rates | Increase in wages, raw material prices, production costs |
Represents | The beginning of price inflation | The idea that inflation is difficult to stop once it has started |
Occurrence | Occurs when there is a surge in consumer spending or investment, leading to a higher demand for goods and services | Occurs when there is an increase in production costs, such as wages or raw material prices, leading to a decrease in the supply of goods and services |
Both Demand Pull and Cost Push Inflation can lead to higher prices, but they differ in their underlying causes and effects.
Read more:
- Inflation vs Deflation
- CPI vs Inflation
- Cost of Living vs Inflation
- Inflation vs Recession
- Deflation vs Disinflation
- Deflation vs Recession
- Elasticity of Demand vs Elasticity of Supply
- Aggregate Demand vs Demand
- Supply vs Demand
- Elasticity of Demand vs Price Elasticity of Demand
- Demand Curve vs Supply Curve
- Elastic vs Inelastic
- Command vs Demand
- Movement vs Shift in Demand Curve
- Aggregate Demand vs Aggregate Supply
- Classical vs Keynesian
- Command Economy vs Market Economy
- Price vs Cost
- Fetch vs Push