Which of the following refers to a situation where the prices of goods or services remain the same or constant over some time?a)Price flexibilityb)Price Rigidityc)Price Bendingd)Plus PricingCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Price rigidity refers to a situation where the prices of goods or services remain the same or constant over some time. In such cases, the prices do not change in response to shifts in supply and demand conditions in the market.

Price rigidity can occur due to various reasons, such as government regulations, long-term contracts, industry standards, or the behavior of firms in response to market conditions. It means that even if there are changes in production costs, input prices, or demand for the product, the price charged by the sellers remains unchanged.

Price flexibility, on the other hand, refers to the ability of prices to adjust freely in response to changes in market conditions. In a flexible price system, prices are responsive to shifts in supply and demand, allowing them to fluctuate and reach an equilibrium level. Price flexibility is typically associated with competitive markets where there are no barriers to entry or exit and no significant market power held by individual firms.

In the context of the given options, price rigidity is the correct term that describes a situation where prices remain constant over time. Price flexibility, on the other hand, would indicate a situation where prices are able to change in response to market dynamics.

Answer

Price rigidity refers to a situation where the prices of goods or services remain the same or constant over some time. In such cases, the prices do not change in response to shifts in supply and demand conditions in the market.

Price rigidity can occur due to various reasons, such as government regulations, long-term contracts, industry standards, or the behavior of firms in response to market conditions. It means that even if there are changes in production costs, input prices, or demand for the product, the price charged by the sellers remains unchanged.

Price flexibility, on the other hand, refers to the ability of prices to adjust freely in response to changes in market conditions. In a flexible price system, prices are responsive to shifts in supply and demand, allowing them to fluctuate and reach an equilibrium level. Price flexibility is typically associated with competitive markets where there are no barriers to entry or exit and no significant market power held by individual firms.

In the context of the given options, price rigidity is the correct term that describes a situation where prices remain constant over time. Price flexibility, on the other hand, would indicate a situation where prices are able to change in response to market dynamics.

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