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TOPICInflation & Its Types

Cost Push InflationDemand Pull Inflation

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In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

CPI = Cost of market COM in last year

Also called CPI

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Inflation rate in Pakistan

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when price levels rise because of an imbalance in the aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply,

prices increase.

Demand Pull Inflation

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Graphical Representation

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Causes

Energy crises Increase in population Decrease in supply Marketing and new technology Customs and traditions Backward mean of production

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Cost Push Inflation

A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

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Graphical Representation

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Causes Monopoly Natural disasters

› Shortage of resources Component costs

› increase in the prices of raw material (natural resources).

Rising labor costs › creating labor shortages

Higher indirect taxes imposed by the government › a rise in the duty on alcohol, cigarettes and

petrol/diesel.

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A fall in the exchange rate› this can cause cost push inflation because

it normally leads to an increase in the prices of imported products.

Loose Govt. control Surplus Employment. Imports

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Amna Abdul

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