There are two main drivers of inflation, they are demand-pull and cost-push. The demand-pull condition appears when the consumer demand triggers the price up. Meanwhile, the cost-push appear when the cost of the supply force the price higher.
Demand Full Inflation
Demand full inflation is a common cause of inflation. It is when the demand for services and goods increases way above the available supply. The limited supply usually comes from the inability of companies, either their manufacture or their worker, to boost their supply.
During that situation, if sellers do not raise the price, then, the price will sell out. Thus, understanding that chance, sellers will raise the price of high triggering inflation.
There are five primary causes of demand-pull inflation. First is a growing economy. In a growing economy, people become confident since they get a better job. Thus they spend more.
Second is people expecting inflation as the prices rise. The expectation, later, motivates people to even spend more capital right at that moment before the price increases in the near future.
The third cause is the discretionary fiscal policy. That is when the government taxes less or spends more. Those two scenarios increase the chance for people to own more money, increases demand, and trigger inflation.
The fourth cause is marketing and new technology. Specifics assets and products can experience demand-pull inflation because of marketing and new technology. The inflation in these assets can trigger widespread price increases.
The last is the money supply over-expansion. The money supply can be loans, credit, and mortgages, not only cash. Over expansion, money supply lowers the value of the dollars. Then, the value of the declining dollar to foreign currencies will automatically increase the price of foreign products.
Cost-Push
Cost-push inflation happens when there is a supply shortage together with enough demand. There are five primary causes of inflation in the product supply The first is wage inflation. Increasing salaries will make people purchase things. Yet, this rarely happens without active labor unions.
The second is a monopoly demand done by the company. The company owns the full power to control the entire supply of goods and services.
The third cause is a natural disaster. It damages the production facility and disturbs the production process. The fourth is the depletion of natural resources. The last cause is government regulation and taxation. It can distract the supplies and production process.
