TYPES OF INFLATION

1. Demand pull inflation

2. Cost push inflation
3. Built in Inflation

1. Demand - Pull Inflation

When the money supply increases in the market the purchasing

power of individuals also increases, thus to lead to increase in
demand and will be result to shortage of supply. Demand Pull
Inflation occurs when the need for goods and services is higher
than the available capacity required meeting it. Due to higher
demand and less supply, the prices of goods and services get
increased.

Demand-pull inflation would make the in-demand product or

service more expensive.

When the National Government of Zimbabwe prints more

money and increases the supply of money to the market in
response to the national debt of the country. The purchasing
power of the people will increases because of too much money supplied. Due to the increased of
demand of goods and services, the supply will fall which results in a shortage and an increase in
the price of goods and services.

For Example, when an exclusive sneaker is in trend, many people want to buy another. The
demand for the sneaker will go up, then the supply of it will go down and lead to a shortage, then
businesses will take advantage of the in-demand product to increase the price and gain profit.

2. Cost - push Inflation

This type of inflation occurs when the overall price of goods increases due to an increase in the
cost of other commodities required in production like machines, labor wages, etc. The increase in
the production cost results in the rise of the value of the
finished good.

Cost-push inflation occurs when it becomes more expensive

to produce goods or provide services. This can be caused by
rapidly increasing wages or material costs.

The most common example of Cost-Push Inflation occurs in

the energy sector. The continuous demand for gasoline in the
economy and the importance of it in the production and
transportation of goods and services affects the entire economy when the price of it is expensive
and increases the prices of raw materials in production.

The ongoing conflict between Russia and Ukraine is the primary cause of oil price surges in a
different countries. Because Russia is one of the biggest oil suppliers in the world and European
Union and United State are Banning Russian Oil.

3. Built-in Inflation

This type of inflation generally affects all sectors and persons in the economy and it is caused by
no one. When a country's commodity prices rise, workers will demand higher wages to keep up
with or maintain their quality of living as a result of the
higher costs of finished goods known as built-in inflation. It
is an endless cycle of increasing spending.

To maintain the living costs of people, the wages of the

workers will increase to adapt and survive in the economy.

For Example, When the price of goods and services rises,

workers will demand an expansion in wages and when the
wages are higher, the Demand for people will increase then
producers can Increase the prices.