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

Explanation:

Demand-pull inflation results when prices rise because aggregate demand in an economy is greater than aggregate supply. ... Cost-push inflation is a result of increased production costs, such as wages and raw materials and decreased aggregate supply.

Answer and explanation:

As we know, inflation refers to a continuous and generalized increase in prices while the purchasing value of money falls.

According to the cause, inflation can be categorized as demand-pull or cost-push.

Demand-pull inflation takes place when the demand for a product is superior to its supply. In this case, the purchasing power of the population goes up, but the capacity to provide people with the product or service they want does not keep up. Because more people want the same product, its price increases.

Cost-push inflation, on the other hand, happens when the price of raw materials goes. That increase is relayed to consumers. Suppose a natural disaster causes the production of tomatoes to fall to half its normal amount. The ketchup factories still need to buy tomatoes, but now they cost more for there are fewer available. Because the tomatoes cost more, the ketchup has to cost more as well so the factories can still profit with the sales. The consumer ends up suffering the consequences of the increased price of raw materials.

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