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Inflation may be due to increased demand or due to a rise in the cost of raw materials.
An increase in demand for goods and services creates an inflationary pressure. At a given time, the quantities of goods and services available may not be able to match an unexpected increase in demand. Sellers would then react by raising prices. Hence, this is called, demand-pull inflation.
When the cost of production of certain commodities increases, we experience a cost-push inflation. Let’s say, if crude oil prices increased because of the conflict in a supplier country, there will be corresponding price increases for all those goods which use crude oil as a direct or indirect component of production.
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