Demand-Pull Inflation occurs when the demand for goods and services exceeds their supply. This imbalance often leads to higher prices as consumers compete to purchase limited products. Factors contributing to increased demand can include rising consumer confidence, government spending, or lower interest rates, which encourage borrowing and spending. As demand increases, businesses may struggle to keep up, resulting in a rise in production costs. To maintain profit margins, companies often pass these costs onto consumers, further driving up prices. This cycle can create a sustained period of inflation, impacting the overall economy and purchasing power of consumers.