How Do Automated Market Makers (AMMs) in DeFi Mitigate or Cause Slippage?

AMMs use a mathematical formula (like x y=k) to determine asset prices, and slippage is an inherent feature. Large trades cause significant price movement along the curve, resulting in slippage.

They mitigate slippage by incentivizing liquidity providers to deposit more assets, which flattens the curve and reduces the price impact of a trade.