Question

Demand pull inflation arises due to ________.

• A. persistent rise in factor cost
• B. mismatch between demand and supply of commodities
• C. combine phenomena of demand pull and cost push inflation.
• D. increase in price of precious metal.

Answer 1

Answer: (B)

mismatch between demand and supply of commodities

Demand pull inflation is an economic situation where the general price level in the economy for all the relevant goods and services has a constant appreciable rise over a considerable period of time due to excess demand in the economy which can arise either due to increase in the wants of the people that increases demand or shortage in the supply that decreases the supply of the goods and services in the economy. Therefore, demand pull inflation arises due to mismatch in the demand and supply of the commodities in the economy.