Kysyntädeflaatio

Kysyntädeflaatio, also known as demand-pull deflation, is a type of deflation that occurs when the overall demand for goods and services in an economy falls significantly below the overall supply. This imbalance leads to a decrease in prices as producers and sellers try to entice consumers to buy their products with lower prices. It is a situation where "too much money is chasing too few goods," but in reverse, meaning there are too many goods and not enough money to purchase them.

The primary causes of kysyntädeflaatio are often a sharp decline in consumer spending, reduced business investment, or a significant contraction in government spending. Factors that can contribute to these declines include a recession, a financial crisis, a loss of consumer confidence, or a sharp increase in savings rates. When demand weakens, businesses find themselves with unsold inventory. To clear this inventory and avoid further losses, they are compelled to lower prices. This price reduction, in turn, can create a deflationary spiral.

As prices fall, consumers may postpone purchases, expecting even lower prices in the future, further reducing demand. Businesses then face even greater pressure to cut prices and production, leading to job losses and a further contraction of the economy. This cycle can be difficult to break and can have severe consequences for economic growth and employment. Kysyntädeflaatio is generally considered a negative economic phenomenon, contrasting with cost-push deflation which arises from a decrease in the cost of production.