Explain the concept of inflation. Discuss in detail the cost-push & demand-pull inflation.

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

1) Demand pull inflation :

Demand pull inflation is nothing but a situation in the economy where Aggregate demand in an economy was more than the Aggregate supply.It means the prices of the goods will be most higher in this inflation situation. Which means more money for the fewer goods.And this Demand pull inflation happens only in the economy where the Employment rate was high.

2) Cost push inflation :

Cost push inflation is nothing but a situation where there was a increase in the cost price of the inputs like rawmaterial etc., to make the final output.Due to the increase in cost price of the inputs there was an increase in the prices of the outputs.However the demand remain constant the prices of the output commodities will be increased automatically which leads to rise in the overall price level.

3) Difference between Demand pull inflation and Cost push inflation :

In case of demand pull inflation , the inflation was caused by the increase in demand for the product due to that the prices of the commodities will be increased which leads to the demand pull inflation.But in case of Cost push inflation the inflation was caused due to the increase in prices of the input factors that is rawmaterial, labour etc., which leads to Cost push inflation.