ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply.

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: -Cost-push inflation theorizes that as costs to producers increase from things like rising wages, these higher costs are passed on to consumers. Demand-pull inflation takes the position that prices rise when aggregate demand exceeds the supply of available goods for sustained periods of time.

Detailed explanation-5: -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.