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Ben & Jerry's just had its annual free cone day yesterday! and it's definitely linked to econs, so here goes...
all across the island, queues of people have been spotted around all B&J outlet. why is this so? because price is zero, that's why price is perfectly elastic (horizontal; parallel to the x-axis). there will be no end to the queues, in a way.
in this case, other ice cream sellers, such as swensens, gelare etc shouldn't have opened shop at all, since B&J is considered a substitute for their products too, so demand for their ice cream will be very low. by not opening their shops, they would be able to make variable costs for that day zero, minimizing losses. however, some sellers have differentiated products, thus their demand would not be affected as much. others, like gelare, also thought of ways to defend their business, by having half-price discounts for their waffles.
shops around B&J outlets stand to gain from the free cone day, since crowds attracted to the outlets would also have a tendency to shop in that area. a very good example is those shops selling drinks and beverages, since people will be thirsty after eating ice cream.
even though B&J might seem to be making losses from this event, they actually gain from other aspects other than revenue. via this event, they are building up their brand name, rewarding customer loyalty, attracting new cosumer groups and driving out competitors. this can also be seen as a form of advertising for their product, as they gave out flyers introducing their new ice cream flavour that is going to be available island-wide in may.
econs is important, as it helps you analyze the things which happen around you, so happy mugging for next week's test, people!
Kai Jian
