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INFLATION (Cost Push and Demand Pull)

This document discusses two types of inflation: demand-pull inflation and cost-push inflation. Demand-pull inflation occurs when aggregate demand increases faster than aggregate supply, resulting in "too much money chasing too few goods." It is caused by factors like increases in money supply, reductions in taxes, or repayment of past debt. Cost-push inflation occurs when aggregate supply decreases, shifting the supply curve backwards. It is caused by increases in costs of production like higher raw material prices, taxes, wages, and bills. Both result in a general rise in price levels across the economy, but they differ in their underlying causes.

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Christine Joy Marcel
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901 views18 pages

INFLATION (Cost Push and Demand Pull)

This document discusses two types of inflation: demand-pull inflation and cost-push inflation. Demand-pull inflation occurs when aggregate demand increases faster than aggregate supply, resulting in "too much money chasing too few goods." It is caused by factors like increases in money supply, reductions in taxes, or repayment of past debt. Cost-push inflation occurs when aggregate supply decreases, shifting the supply curve backwards. It is caused by increases in costs of production like higher raw material prices, taxes, wages, and bills. Both result in a general rise in price levels across the economy, but they differ in their underlying causes.

Uploaded by

Christine Joy Marcel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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INFLATION:

DEMAND-PULL
AND
COST-PUSH
Reporter: Vanessa Ericka A. Lara
BSED-III
What is Inflation?

The increase in the amount of


money necessary to obtain the
same amount of product or
service before the inflated price
was present.
Inflation refers to the rise in the prices of most
goods and services of daily or common use.
The two (2) types of Inflation

1. Demand Pull Inflation

2. Cost-Push Inflation
What’s the difference?
The difference between these two types
of inflation is found in their types of
inflation is found in their causes.

Both have the same effects (increasing


price level), but they are(increasing price
level), caused by different things.
Basic Terms:
Aggregate demand
is the total volume of goods and
services demanded by the country.

Aggregate supply
Is the total volume of goods and
services produced by an economy
of a country at a given price level.
Demand-Pull Inflation
Demand–pull inflation occurs when the
level of aggregate demand increases
faster than the underlying level of supply.

“too much money chasing too few


goods”
Demand-Pull Inflation Curve

When there is a right war shift in the demand


curve, we can say that it is a demand-pull inflation
Factors for Increase in Demand

Increase in Reduction in Repayment of


Money Supply Taxes Past
Internal Debt
Increase in Increase in Depreciation of
Exports Income Local exchange
rates
Cost-Push Inflation
Demand–pull inflation occurs when the
level of aggregate demand increases
faster than the underlying level of supply.

“too much money chasing too few


goods”
Cost-Push Inflation Curve

When there is a shift in the supply curve


backwards, we say that inflation is a cost-push
Factors for Increase in Cost

Increase in Increase Increase in rent,


Cost of raw in Taxes wages, and bills
materials
Shortage of Natural Increase in
supplies calamities exports
Effects of Inflation
Thank you!

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