Prices:Flexible Versus Sticky The economy's behavior depends partly on whether prices are sticky or flexible: If prices are sticky,then demand won't always equal supply.This helps explain unemployment (excess supply of labor) the occasional inability of firms to sell what they produce ■ Long run:prices flexible,markets clear,economy behaves very differently. Return CHAPTER 1 The Science of Macroeconomics slide 27 CHAPTER 1 The Science of Macroeconomics slide 27 Prices: Flexible Versus Sticky ▪ The economy’s behavior depends partly on whether prices are sticky or flexible: ▪ If prices are sticky, then demand won’t always equal supply. This helps explain – unemployment (excess supply of labor) – the occasional inability of firms to sell what they produce ▪ Long run: prices flexible, markets clear, economy behaves very differently. 4 Return