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Demand-Pull and Cost-Push Inflation definitions

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  • Inflation
    A sustained rise in overall price levels, often resulting from shifts in demand or supply that disrupt market equilibrium.
  • Demand-Pull Inflation
    A price increase caused by excessive demand that cannot be matched by available supply, leading to higher equilibrium prices.
  • Cost-Push Inflation
    A price increase resulting from rising production costs, which reduce supply and elevate market prices.
  • Supply Shock
    An unexpected event that alters production costs or availability, causing a sudden shift in the supply curve.
  • Equilibrium Price
    The market price where quantity demanded equals quantity supplied, often altered by inflationary pressures.
  • Quantity Supplied
    The amount of goods producers are willing to offer at a specific price, which may remain constant during demand-pull inflation.
  • Market Equilibrium
    A state where supply and demand intersect, determining price and quantity; disrupted during inflationary episodes.
  • Production Costs
    Expenses incurred by firms to create goods, which, when rising, can trigger cost-push inflation.
  • Scarcity
    A condition where available resources or goods are insufficient to meet demand, intensifying inflationary effects.
  • Profit
    The financial gain from selling goods after covering production costs, often reduced during cost-push inflation.
  • Supply Curve
    A graphical representation showing the relationship between price and quantity supplied, shifting left during supply shocks.
  • Demand Curve
    A graph illustrating how quantity demanded varies with price, shifting right during demand-pull inflation.
  • Price Level
    The average of current prices across the economy, which rises during both demand-pull and cost-push inflation.
  • Output
    The total quantity of goods produced, which may decrease during cost-push inflation due to reduced supply.
  • Macroeconomics
    The branch of economics focusing on broad phenomena like inflation, supply shocks, and overall price levels.