What is inflation of demand?

Inflation of demand, sometimes called inflation of demand, results, if there is an excess of demand and no ability or very low ability, to increase the offer. In some respects, it is a simple economy of supply and demand-when demand is rising, the price rises to return the supply and demand to balance. In some cases, however, the offer can be increased. This usually does not apply to inflation of demand. If inflation occurs, in some respects inflation is a desirable scenario. Inflation of demand can be one of the symptoms of a healthy economy.

The idea of ​​inflation theory of demand is simple. It simply assumes that as demand is rising, the company naturally hires more people to fulfill this demand if the business is good. At some point, however, it will no longer depend on how many people are employed. WIVRCHOL LL production capacity, or at least gets to a point where the increase in capacity is so small that the very small difference in the performance of demand. This naturally leads to raising prices, cOJ will cause demand inflation.

As soon as the company has moved its production capacity to a certain level, it is extremely difficult for its further increase. For example, the production mounting line can only go so fast. Once the line runs several shifts around hours, there may be little different that society can do.

In cases where production is pushed to the limit, companies have several options. One is to increase the number of production lines. It can be a very expensive choice that usually requires the construction of a new device or additional equipment of existing equipment. This is expensive and companies may be unwilling to do it without good warranty that the demand will remain at an increased level.

For companies that decide to increase the production of equipment and production lines, this is not a rapid repair and the demand inflation is likely to continue to implement. Building these devices requiresPlanning and a lot of time. Most likely, the time will probably take at least 12 months from the initial concepts to full production in a new or even additional device. Therefore, if other forces are not to reduce demand, inflation of demand is likely to continue for considerable time.