Economic Awareness - Sectors of Indian Economy
What is the primary reason inflation leads to 'menu costs' for businesses?
What is the primary reason inflation leads to 'menu costs' for businesses?
medium Q5 of 15
Step-by-Step Solution
Step 1: Define 'menu costs'
Menu costs are the costs businesses incur when changing prices frequently due to inflation.Step 2: Analyze options
Frequent price updates cause menu costs. Increased raw material costs and wages affect production costs but are not menu costs. Government taxes are unrelated.Final Answer:
Frequent need to update prices → Option CQuick Check:
Menu costs = Costs of frequent price changes ✅
Quick Trick: Think of restaurants changing menus often during inflation.
Common Mistakes:
- Confusing menu costs with production or tax costs.
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