advertising & elasticity
Not what you're looking for?
How would you explain the following?
KinderCare operates the only daycare center in an exclusive neighborhood and they are making a large economic profit. The owners believe that new day cares will soon learn of this highly profitable market & try to enter the market so they decide to begin spending immediately a large amount of money on advertising designed to decrease elasticity. Do you believe the owners should wait until these new day cares actually enter? Why or why not? How could the advertising be employed to allow KinderCare to keep price above average cost without encouraging the entry?
Purchase this Solution
Solution Summary
The solution discusses questions regarding advertising and elasticity regarding day cares.
Solution Preview
Here is your answer:
There are pluses and minuses to waiting for the competitor to enter the market. If they wait, they run the risk that the new entrant will take away some of their market share. However, on the other hand, if the wait, they would have an opportunity to see how their competitor operates in their market. After ...
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.