Embedded Files
Usually, an increase in prices leads to the consumption of one or both goods in the case of normal goods. There are two effects that are mainly responsible for this. The substitution effect occurs when people buy less of the product the price of which has increased and more of that the price of which hasn’t. The income effect takes place when the purchasing capability of the buyer goes down which leads to a cut in the buying behavior of both the items.
We researched on the 3 main reasons for inflation such as Demand -pull , Cost push , and Built in inflation .
Demand pull inflation:
Demand pull inflation happens when there is an increase in demand and the supply decreases. When supply cannot meet growing demand , prices for goods and services are pulled higher.
Cost push inflation :
Cost push inflation happens when there is a decline in the supply of goods and services and demand grows, driving prices higher.
Built in inflation:
Built in infation occurs when workers expect their wages to increase when prices of goods and services increase to help maintain their living costs.
Page updated
Google Sites
Report abuse