Can you help me understand this Economics question?
- Seventy-twopercentofthemembersoftheUnitedFoodandCommercialWorkersLocal 655 voted to strike against Stop ’n Shop in the St. Louis area. In fear of similar union responses, two of Stop ’n Shop’s larger rivals in the St. Louis market—Dierberg’s and Schnuck’s—decided to lock out their union employees. The actions of these supermar- kets, not surprisingly, caused Local 655 union members to picket and boycott each of the supermarkets’ locations. While the manager of Mid Towne IGA—one of many smaller competing grocers—viewed the strike as unfortunate for both sides, he was quick to point out that the strike provided an opportunity for his store to increase market share. To take advantage of the strike, the manager of Mid Towne IGA increased newspaper advertising by pointing out that Mid Towne employed Local 655 union members and that it operated under a different contract than “other” grocers in the area. Use a graphto describe the expected impact of advertising on Mid Towne IGA (how the equilibrium price and quantity change). Identify the type of advertising in which Mid Towne IGA engaged. Do you believe the impact of advertising will be permanent? Explain. (LO1, LO3, LO5)
- Florida, like several other states, has passed a law that prohibits “price gouging” imme- diately before, during, or after the declaration of a state of emergency. Price gouging
is defined as “selling necessary commodities such as food, gas, ice, oil, and lumber at a price that grossly exceeds the average selling price for the 30 days prior to the emer- gency.” Many consumers attempt to stock up on emergency supplies, such as bottled water, immediately before and after a hurricane or other natural disaster hits an area. Also, many supply shipments to retailers are interrupted during a natural disaster. Assuming that the law is strictly enforced, what are the economic effects of the price gouging statute? Explain carefully. (LO1, LO3, LO5)
0 comments