Final answer:
Escalation pricing is when a company requires customers to pay today's price and all or part of any inflation increase that takes place before delivery. It provides flexibility for both the company and the customer in adjusting prices to account for inflation.
Step-by-step explanation:
When a company requires customers to pay today's price and all or part of any inflation increase that takes place before delivery, it is known as escalation pricing. Escalation pricing allows the company to adjust the price to reflect changes in inflation, ensuring that they are not locked into a fixed price that may be impacted by inflation. This type of pricing is commonly seen in long-term business contracts, where both the seller and the buyer benefit from the flexibility it provides.