Sticky Prices

Sticky prices refer to the tendency of some prices to remain unchanged or slow to adjust despite shifts in supply, demand, or economic conditions. This can happen because businesses face costs, menu adjustments, or contractual agreements that make changing prices quickly inconvenient or costly. As a result, prices do not always move immediately, which can lead to short-term imbalances in the economy, affecting things like employment and production. Essentially, sticky prices act as a temporary buffer, causing prices to be less flexible in response to economic changes.