Q5 The Costs of Inflation

Consider the following scenario: Luther runs a small sign printing business. He recently took half of a workday to update the prices for his services on his website to reflect the higher costs he faces from his suppliers.

Q5.1

Which of the following costs of inflation best applies to the scenario?

a. Shoeleather cost

b. Menu cost

c. Relative price variability

d. Tax distortions

Q5.2

Explain your answer to Q5.1.