Why is this not a dmeand pull inflation

Question

when consumers have to spend more money on good and services becasue businesses are charging more for each and every level of output becasue their cost of production has risen. why is this not a demand pull inflation.

Answer 1

Juan,

 

Consumers are spending more money because prices have risen, not because they are buying (i.e., demanding) more units of existing products or even new innovative products.

 

So if consumers are buying the same or fewer numbers of products whose prices have risen, then that is cost-push inflation created by the makers and sellers of the products. Thus, makers shift the supply curve down because they need a higher price to make the same number of units.

 

But if consumers are buying more products and bidding up their prices because there are temporary shortages of them available until makers ramp up production, then that is demand-pull inflation created by consumers.  Thus, consumers shift the demand curve up because they are willing to buy more units.