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

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The difference between these two types of inflation is found in their causes.  Both have the same effects (increasing price level), but they are caused by different things.

Demand-pull inflation is caused by excess demand.  When the people as a whole get more money they are able to pay more for goods and services (unless more goods...

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dr-anu-singh | Student

Inflation is the persistent rise in general price level. demand pull inflation is one where there is an increase in price level due to the increase in the aggregate demand.

On the other hand the cost push inflation is one where price level increases due to the increase in the price of inputs like increase in wages and raw materials. the increase in price of inputs decreases the short run aggregate supply which increases the price level.

thus if there is a shift in the supply curve backwards we say that inflation is cost push and when there is a rightward shift in the demand curve we say that its demand pull inflation.