Which of the following is an example of demand-pull inflation?Mobile manufacturers increasing the prices of their highest-selling models as more and more people line up to buy themCosmetics manufacturers increasing the prices of their organic products as a flood situation in the state from where they source their raw materials has severely destroyed the organic farmsSteel manufacturers increasing the prices of steel bars, as the mines from where they get the iron ore are currently shut owing to a union protest
Question
Which of the following is an example of demand-pull inflation?Mobile manufacturers increasing the prices of their highest-selling models as more and more people line up to buy themCosmetics manufacturers increasing the prices of their organic products as a flood situation in the state from where they source their raw materials has severely destroyed the organic farmsSteel manufacturers increasing the prices of steel bars, as the mines from where they get the iron ore are currently shut owing to a union protest
Solution
The example of demand-pull inflation from the options provided is: "Mobile manufacturers increasing the prices of their highest-selling models as more and more people line up to buy them".
Here's why:
Demand-pull inflation occurs when demand for a product or service increases so much that it outstrips supply, causing the price to rise. In this case, the high demand for the mobile manufacturer's top-selling models is causing the price to increase, which is a classic example of demand-pull inflation.
The other two examples are instances of cost-push inflation, where the cost of production increases, causing the price of the final product to rise. In the case of the cosmetics manufacturers, the cost of sourcing organic materials has increased due to the flood. For the steel manufacturers, the cost of getting iron ore has increased due to the mines being shut down. These increased costs are then passed on to the consumer in the form of higher prices.
Similar Questions
Which of the following is an example of demand-pull inflation?Tea companies in a region of India are increasing the prices of their products, as unexpected and heavy rains have destroyed all the crops used for producing tea products.Xbox manufacturers are increasing the prices of their latest gaming consoles in big cities, as they are seeing an increase in consumption in urban areas.Tomato growers are increasing the prices of tomatoes, as a new virus has spread and destroyed most of their tomato crops.Mobile phone companies are increasing prices as their vendors/contracts are increasingly facing demands for higher wages from their labour unions.
Explain the concept of demand-pull inflation.
Demand-pull inflation is commonly associated with which type of economic situation? A. Recession. B. Deflation. C. Economic boom. D. Stagflation.
Which of the following can cause demand-pull inflation if the economy is currently in equilibrium at full-employment GDP? A reduction in government spending plus an increase in taxes. A decrease in imports plus an increase in exports. An increase in the company income tax rate plus higher interest rates. A decrease in real wages. An increase in real interest rates plus a decrease in nominal interest rates.
_____ inflation is inflation that occurs when the demand for goods and services is greater than the supply.Question 6Answera.Supply-sideb.Demand-pullc.Demand-pushd.Cost-pushe.Demand-side
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