ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation is thought to be caused by different mechanisms. When aggregate demand surpasses available supply, higher prices are the result. This is demand-pull inflation. A low unemployment rate is unquestionably good in general, but it can cause inflation because more people have more disposable income.

Detailed explanation-2: -Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases. When supply cannot meet growing demand, prices for goods and services are pulled higher.

Detailed explanation-3: -The law of supply and demand is the theory that prices are determined by the relationship between supply and demand. If the supply of a good or service outstrips the demand for it, prices will fall. If demand exceeds supply, prices will rise.

Detailed explanation-4: -Demand-pull inflation is a type of inflation that occurs when there is an increase in demand for goods and services. This type of inflation is typically caused by overall economic growth, technological innovations, or a rising inflation rate.

Detailed explanation-5: -Demand-pull inflation includes times when an increase in demand is so great that production can’t keep up, which typically results in higher prices. In short, cost-push inflation is driven by supply costs while demand-pull inflation is driven by consumer demand-while both lead to higher prices passed onto consumers.