Popcorn and coca cola are complementary goods. when the price of coca cola rises:

ECO 201 Final: Coca-Cola

Southern New Hampshire University

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

I am an introductory economic student and want to try some economic concepts like demand, supply and equilibrium analysis of coca-cola company and below drawn graphs are based on the assumptions.

INTRODUCTION:

The Coca-Cola Company is an American multinational beverage company, with its headquarters in Atlanta, Georgia. The first company that conducted its operation in the soft drink industry was Coca-Cola. It is the world’s largest non-alcoholic beverage company serving more than 1.8 billion consumers daily in more than 200 countries. It has a portfolio of more than 3,500 (more than 800 no or low calorie) products. However, the company is best known for its flagship product Coca-Cola which was originally intended to be a patented medicine was invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia. The Coca-Cola products can be termed as normal goods, that is, goods whose demand increase as consumer incomes increases. and in august,2019 Coca-Cola has introduced the new product into the market i.e zero sugar where the demand has increased for the product in the market.

The demand curve of Coca-Cola as any other normal goods’ demand curve is downward slopping from left to right, showing the inverse relationship between the price of Coca-Cola and the quantity demanded of Coca-Cola over a given time period. This relationship can be explained by the law of demand which states that as price of a good increases (or decreases), the quantity demanded of that good falls (or rises).Therefore, the lower the price of Coca-Cola, the more a consumer is likely to buy. Hence, it can be concluded that price is major determinant of demand. The effect of a change in price is illustrated by a movement along the demand curve and is referred to as a change in quantity demanded.

SUPPLY CURVE:

Like its demand curve, the supply curve of Coca-Cola is that of a normal good which slopes upwards from left to right, showing the relationship between the price of Coca-Cola and the quantity of Coca-Cola supplied over a given period of time. The effect of a change in price is illustrated by a movement along the supply curve which is often referred as a change in quantity demanded.

EQUILIBRIUM CURVE OF COCO- COLA:

Equilibrium is the point at which at a particular price both quantity demanded is equal to quantity supplied.

From the above diagram, we can see that at a price of $1.50 both quantity demanded and quantity supplied are equal at 1000.

SHIFTS IN DEMAND CURVE:

However, price is not the only factor that determines how much of a good people will buy. There are other factors affecting demand and any change in any other determinants other than price causes a change in demand and a shift in the demand curve.

FACTORS AFFECTING SHIFTS IN DEMAND CURVE :

INCOME: If there is an increase in the income of the consumer there will be an increase in the demand of the coco cola, which in turns results in the right ward shift (increase in demand) of the demand curve and vice-versa.

PRICE OF SUBSTITUTES: If there is an increase in the price of substitute (eg:pepsi) there will be an increase in the demand for coco cola and which results in the right ward shift of the demand curve and vice-versa.

PRICE OF COMPLEMENTARY: If there is an increase in the price of complementary goods like KFC there will be a decrease in the demand of coco cola which in turns leads to the left ward shift(decrease in demand ) of the demand curve and vice-versa.

Taste and preferences: Taste and preferences affect the shifts in demand curve. In the recent past there has been a product introduced in the market with the name zero sugar, which has tend to increase the demand of coca cola.

SHIFTS IN SUPPLY CURVE:

supply is not only determined by price. The other factors influencing the supply of a product causes a shift in the supply curve leading to a change in supply.

FACTORS AFFECTING SHIFTS IN SUPPLY CURVE:

COST OF PRODUCTION: If there is an increase in the prices of inputs such as flavor, sugar, caffeine, there will be an increase in the cost of production of the product and supplier tends to produce less of the product, which leads to left ward shift of the supply curve.

TECHNOLOGY: Any improvement in the techniques of production used by Coca-Cola would leads to decrease in the cost of production and hence supplier would be willing to supply more and there will be a right ward shift in supply curve.

THE NUMBER OF CONSUMERS: Coca-Cola has a large number of consumers and high level of brand loyalty, as a result suppliers are willing to supply more to cater for the need of its customers.

BIBLIOGRAPHY:

What happens to complementary goods when price increases?

Is Coke and Pepsi complementary goods?

What will be the impact of the increase in the price of complementary goods on the demand for the product?

When two goods are complements if the price is good?