What are the costs associated with changing prices called?

The costs associated with changing prices are known as menu costs. This term originates from the restaurant industry, where businesses may incur expenses when updating menus to reflect price changes. These costs can include printing new menus, re-tagging items in a store, or updating digital prices on websites and point-of-sale systems. Essentially, menu costs reflect the resources and efforts businesses need to expend to implement price changes, which can be a significant factor in their pricing strategies.

In economic discussions, recognizing menu costs helps to understand why businesses may avoid frequent price adjustments, even in response to shifts in supply and demand. By understanding these costs, students can grasp how they influence pricing decisions and overall market behavior.