Prices:Flexible Versus Sticky Market clearing:an assumption that prices are flexible and adjust to equate supply and demand. In the short run,many prices are sticky-they adjust only sluggishly in response to supply/demand imbalances. For example, labor contracts that fix the nominal wage for a year or longer magazine prices that publishers change only once every 3-4 years CHAPTER1 The Science of Macroeconomics slide 26CHAPTER 1 The Science of Macroeconomics slide 26 Prices: Flexible Versus Sticky ▪ Market clearing: an assumption that prices are flexible and adjust to equate supply and demand. ▪ In the short run, many prices are sticky-they adjust only sluggishly in response to supply/demand imbalances. For example, – labor contracts that fix the nominal wage for a year or longer – magazine prices that publishers change only once every 3-4 years 4