Menu costs are the costs associated with changes in a company's pricing. This concept has gained importance in New Keynesian economics in its explanation of why prices remain "sticky" and do not adjust to macroeconomic conditions such as inflation. Menu costs can arise from a variety of things such as printing, labor, or customer confusion associated with changing prices. Menu costs are also strongly tied to the concept of price stickiness and how companies decide when to change prices.

While businesses may want to reduce prices during times of economic hardship, menu costs can force them to maintain higher prices that may be detrimental to their situations. Research suggests that firms could be faced with an accelerated decline in sales and fiscal loss if they adhere to their current pricing strategy.

Menu costs can also be tied to uncoordinated pricing strategies and a lack of customer data. Inaccurately gauging customer interest in a changed product can have a tremendously negative effect on a company's sales. A menu cost is incurred because a company must anticipate the customer's reaction to a new price before setting and implementing it. Furthermore, pricing changes are often regional solutions that don't always account for all variables in customer behavior. Companies must also create new marketing and advertisement campaigns associated with the pricing from scratch and that contributes to the menu cost.

One way companies can reduce menu costs is by creating and adhering to a wise pricing strategy that minimizes the need for changes. Companies can set regular tax-effective or consumer-friendly pricing plans before adjusting the figure. This makes it easier on the business for future adjustments and tends to be more economical for the company.

Menu costs can be costly for businesses and should be considered when making decisions about pricing strategy. Businesses must decide on the proper balance between changing prices to meet macroeconomic conditions and incurring the costs associated with simple, regular price changes. A wise, implemented pricing strategy that factors in all the above can help businesses avoid significant menu costs and potential macroeconomic woes.