Answer to Question #211360 in Macroeconomics for Kal

Question

What is sticky price model and purpose of sticky price

Answer 1

A State in which prices remain constant or adjust in a slow rate despite the change in production cost and the sales of goods and services.

They play part in replicating the dynamic behavior of countries inflation and output.

Firms that choose short run quality are forced to adjust to short run prices. There is frequent price changes due to the elastic demand experienced due to market competitions.