The difference between demand pull and cost push inflation is the concept that when the economy is booming and a company is able to raise prices more than they would have or would have otherwise due to a positive demand pull, the company will be able to charge more than they otherwise would have to.
The current situation in the US might seem to be one where demand pull and cost push inflation are happening at the same time. However, one key difference is that in the case of demand pull inflation, the company will be able to charge more than they would have in the same circumstances without the demand pull. The opposite is true of cost push inflation.
In this case, the company will be able to charge more even though they are currently under-billing their customers. It’s only because of their demand pull that they are now underbilling their customers and the more they push up the price, the more they’re underbilling their customers.
It’s actually a little tricky to figure out because of the way companies calculate the cost of inflation. The company is not simply underbilling their customers. In fact, they may be charging more because they are the ones who are underbilling their customers. This is because the company is not actually under-billing their customers… they are simply underbilling themselves.
Companies that demand to be underbilled don’t usually do so by creating a price floor. Instead they charge more because they are the ones who are over-billing their customers. A company that charges more per unit than its customers are able to pay is considered to have “demand pull inflation,” and a company that charges less is considered to have “cost push inflation.
Cost push inflation is when a company is able to raise prices for the customers they have no problem paying more than their competitors. It’s when you can’t pay a certain amount for a product you like and you are looking to go into inventory because you’re making a profit.
Companies that over-billing their customers and companies that over-selling their products are two different things. Companies that over-billing their customers need to find a way to sell more product than they are able to pay for. Over-selling your products can work when you have a limited amount of the product and are in a need for more. And if its a company with a limited amount of the product it may have to get creative to sell more product than they can pay for.
In the real world, companies make money by selling products. What companies over-sell are products they cant sell. And companies that over-bill their customers are creating a shortage of product and will make no money. The market is always trying to work this way in order to get the best price. But the market will always work in a way that makes it hard for companies to make money.
In the example above, the company has a limited supply of product to sell. The demand for the product is high. And yet, the company is over-billing customers for more than they can sell in a given time period. The company is creating a shortage of product. And so, the company over-sells product that isnt needed and creates a new shortage.
The difference between these two types of inflation is that demand pull is a market driven inflation where the company over-sells product that isnt needed, and cost push is a market driven inflation where the company under-sells product that isnt needed, but the market demand for it is still high.