Carlos manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the menu costs of inflation.

Question

Business

Chris Weiss

15 April, 00:02

Carlos manages a grocery store in a country experiencing a high rate of inflation. To keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. His employees regularly deal with customer annoyance over the frequent price changes. This is an example of the menu costs of inflation.

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Aarav Lane · Answer 1

Menu cost of inflation

Explanation:

Inflation is the persistent rise in the price of goods and services in a country. Due to the continuous rise in price, it is necessary for a business organzation to update customers on the new price of goods.

Menu cost of inflation is the cost incurred by a firm as a result of changes in the price of it's goods or services.

Menu cost of inflation includes the cost of reprinting menus, updating price lists, hiring consultant to develop new pricing, contacting a distribution and sales network or manually

re-tagging price of goods.

Menu cost of inflation of a firm depends on the size of the firm, in other words, large firms incurs more menu cost compared to small firms.

Carlos is incurring menu cost of inflation as a result of continuous increase in prices of goods. Menu cost of inflation is important to keep customers aware of changes in price.