Final answer:
Many long-term business contracts feature clauses that allow prices to adjust according to inflation. This adjustment aims to ensure the real price of goods or services remains fair over time for both buyers and sellers. This practice reflects the 'going rate,' helping businesses stay competitive and avoid charging too much or too little.
Step-by-step explanation:
If you've noticed that prices on your invoice have increased, and you are under contract, it is important to consider what type of contract you have. Many long-term business contracts include provisions for automatic adjustments based on inflation. These adjustments mean that the seller is not stuck with a low nominal selling price if inflation is high, and buyers are not committed to a high price if inflation is low. Thus, the contract adjusts to a real price rather than a nominal one, maintaining a fair cost structure for both parties over time.
This kind of mechanism is designed to reflect the 'going rate' for services or goods, similar to the conditions in the agricultural industry. If a business does not adjust for inflation, it risks either charging too much or too little compared to the market average, leading to a potential loss of customers or revenue.