A more thorough explanation:

An escalator clause is a provision in a contract or lease that allows for adjustments to be made to pricing or wages based on changes in market conditions. This can include factors such as inflation, tax fluctuations, or other economic changes.

Imagine that you are renting an apartment with a lease that includes an escalator clause. The lease states that your rent will increase by 3% each year to account for inflation. If the current rent is $1,000 per month, then after one year, the rent will increase to $1,030 per month. After two years, it will increase to $1,060.90 per month, and so on.

This example illustrates how an escalator clause can be used to adjust pricing based on inflation. By including this clause in the lease, the landlord can ensure that they are able to keep up with rising costs and maintain a fair rental price.