Prices tend to be sticky because
A) ﬁrms are worried that frequent price changes would annoy consumers.
B) most ﬁrms have agreements with each other to ﬁx prices at proﬁt-maximizing levels.
C) government controls most prices.
D) foreign competition discourages domestic ﬁrms from price changes.

Question

Quizplus · Accepted Answer

Prices tend to be sticky because firms are worried that frequent price changes would annoy consumers. It is a common belief that frequent price changes can create a negative impact on consumer behavior, reduce brand loyalty and increase the likelihood of customers switching to competitors. Therefore, firms tend to keep their prices stable unless there is a significant change in production costs, demand or competition.

Prices Tend to Be Sticky Because