Reasons advanced for the rigidity of prices to changes in demand but not changes in costs include
A) limitations on the information firms can collect and process.
B) long-term purchasing contracts that fix large components of the cost equation for long periods of time.
C) the managerial simplicity of stable prices.
D) the workings, legal and otherwise, of imperfectly competitive markets.
E) all of the above.

Question

Quizplus · Accepted Answer

All of the choices (A through D) are valid reasons for the rigidity of prices in response to changes in demand but not in costs. They encompass various factors such as information limitations, contractual obligations, managerial preferences for simplicity, and the characteristics of imperfectly competitive markets that can lead to price stickiness.

Reasons Advanced for the Rigidity of Prices to Changes in Demand