Firms alter their prices based on:
A) expected inflation.
B) expected inflation and supply conditions.
C) expected inflation and demand conditions.
D) demand conditions.
E) the previous period's aggregate supply.

Question

Quizplus · Accepted Answer

Firms typically alter their prices in response to changes in demand conditions, as well as expected inflation. Inflation can impact the costs of production, and firms may adjust prices accordingly. However, demand conditions are often the primary driver of price changes, as changes in demand can impact firms' ability to sell products at current prices or generate profits. Supply conditions may also impact prices, but are generally a secondary factor. The previous period's aggregate supply is not typically a significant factor in pricing decisions, as firms are more likely to focus on current market conditions.

Firms Alter Their Prices Based On