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DEFINITION of 'Demand-Pull Inflation'. A term used in Keynesian economics to describe the scenario that occurs when price levels rise because of an imbalance in the aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply, prices increase. Economists will often say that demand-pull inflation is a result of too many dollars chasing too few goods.
This is cost-push inflation (as opposed to demand-pull) because it originated from the supply-side: it was an increase in the cost of production that led to the inflation. Many other examples of cost-push are possible. Unions demanding (and receiving) higher wages for workers is perhaps another good example. (Since labour is also a widely-used input, the reasoning is similar to that of an oil price increase.)