The cost of changing prices in response to an economic shock is called

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The cost of changing prices in response to an economic shock is called the menu cost. This refers to the cost incurred by businesses when they have to update their menus or price lists due to changes in the market conditions, such as fluctuations in demand, rising input costs, or changes in government policies. The menu cost includes not only the physical cost of printing new menus but also the cost of informing customers about the new prices, training employees, and adjusting inventory levels. The menu cost can reduce firms' profitability and slow down the response of prices to economic shocks, creating sticky prices.

The Cost of Changing Prices in Response to an Economic