Principles of Macroeconomics / Unit 9 MAC 0804 short lesson, about 20 seconds
The Coordination Problem and Menu Costs
Captions available
The idea
Workers might accept lower pay if every worker did, but no decentralised economy can arrange that promise. Firms change prices infrequently because changing them costs analysis, relabelling, reprinting and customer goodwill.
In practice
These are menu costs, named for the printed menu a restaurant would have to replace.
Where people slip
Both are arguments about why adjustment is slow, not about why it never happens.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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