Question

Question.. Seventy-two percent of the members of the United Food and Commercial Workers Local 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 Schnucks’s—decided to lock out their union employees. The actions of these supermarkets, not surprisingly, caused Localunion 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 Localunion members and that it operated under a different contract than “other” grocers in the area. Use a graph to describe the expected impact of advertising on Mid Towne IGA (how the equilibrium price and quantity change). Identify the type of advertising in which Midtown IGA engaged. Do you believe the impact of advertising will be permanent? Explain

Short answer

Answer:

The Midtown IGA is involved in informative advertising. This advertising agency will not create permanent results.

Step-by-step solution

Demand and supply:

The Midtown IGA’s situation is discussed with the following graph.

The original demand and supply curves are illustrated at points D and S in the diagram. If a company creates a new advertisement, the demand for its product is likely to rise.

The demand curve will change as a result of the increase, and the price of the commodity will rise as a result of the shift.

Impact of Advertising:

This advertisement is informative. Informative advertising provides factual information about the product or service. This type of advertising stresses the positive features of a product and makes sure that it is of high quality.

This type of advertising will increase the sale of the product.

The effect of this advertisement will not be long lasting because this advertisement informs consumers that it is giving work to union workers, but other firms are trying to boycott. Nevertheless, these kinds of advertising make sure the product is of high quality and the company spends more for its employees. The increase in sales of the product is likely due to this.