What is demand pull inflation? Write four causes responsible for it.
Demand pull inflation is the type of inflation where demand plays an important role in inreasing the price.
The main causes of it are:
1) Black economy: when there is black money in the system, people tend to demand more for luxuries instead of necessities. Due to this other shopkeepers/manufacturers raise the price. Sometimes small retailers also increase the price by see the other shopkeepers in order to earn more.
2) Injection of money in the economy: when government injects the money in the economy through the bonuses and benefits to the government employees, the demand increases and thus the price also increases
3) Infrastructural development: infrastructural development in terms of education and imployment generation also raises the income and this also increases demand
4) Less suply of goods: When there is less supply of goods and more demand then also price increases
5) festive season: this is anothe kind of cause. As we know that the demand during festive season increases but shopkeepers create artificial scarcity and sell goods at a price higher than the usual price.
(Consider shopkeepers as manufacturers)