BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -It’s not just cars that are affected, though. With almost everyone gainfully employed and borrowing rates at a low, consumer spending on many goods increases beyond the available supply. That’s demand-pull inflation in action.

Detailed explanation-2: -For example, if manufacturing tires suddenly becomes twice as expensive, the prices of those tires will also increase, causing inflation. This could even affect the car market, as car manufacturers will need to pay more to complete their vehicles.

Detailed explanation-3: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

Detailed explanation-4: -Demand-pull inflation As a result, demand for goods and services will increase relative to their supply, providing scope for firms to increase prices (and their margins – which is their mark-up on costs).

Detailed explanation-5: -An example of demand-pull inflation is-Consumers have more money to buy televisions, and as a result the prices of the televisions and its parts are rising.