Demand-Pull Inflation

Demand-pull inflation occurs when the overall demand for goods and services in an economy outpaces supply. Imagine a popular concert where more people want tickets than there are seats; the ticket prices rise. Similarly, when consumers and businesses want to buy more than what is available, prices increase. This situation often arises in a growing economy, fueled by factors like increased consumer spending, government expenditure, or low-interest rates. As demand exceeds supply, inflation occurs, leading to higher prices across various sectors.