Question

Explain what economists mean by “menu costs.”

Short answer

Economist use this expression that refers to any changing in nominal prices. "Menu Cost" comes from the restaurant industry.

Step-by-step solution

Concept Introduction

New Keynesian financial specialists recommend menu costs as one microeconomic clarification for macroeconomic cost tenacity, which can make an economy neglect to respond to changing macroeconomic circumstances.

Menu Cost

Menu costs are the expenses achieved by a business when the costs it offers to its clients change. An exemplary model is a café that must actually print new menus each time the costs of its dishes change. For instance, an eatery ought not change its costs until the extra income produced is adequate to take care of the expense of printing new menus. Practically speaking, notwithstanding, deciding the balance market cost or representing all menu expenses might be troublesome, making it challenging for firms and customers to act definitively as such.