Price Elasticity Of Demand And Demand Essay

Price Elasticity Of Demand And Demand Essay

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Price Elasticity of Demand
According to Microeconomics, Price Elasticity of Demand is the responsiveness of the quantity demanded to a change in price, measured by dividing the percentage change in the quantity demanded of a product by the percentage change in the product’s price (Hubbard & O’Brien, 2015). Demand is considered elastic when the quantity demanded for a product increases or decreases in response to price change. Normally, sales increase with price drops and decrease when prices rise. Coca Cola products are considered to have an elastic demand because quantity demanded for its products often change when prices change. If the price of Coke goes from $1.50 a bottle to $2.00 and the price of a 20 oz. Pepsi remains at or around $1.50 then many customers will go for the similar yet cheaper product. Therefore, demand for Coke decrease while demand for Pepsi increases. Inelastic demand is when the quantity demanded for a product does not increase or decrease with the rise and fall in its price. The quantity demanded for a product is unaffected when the price changes. “That typically occurs with goods or services that people need every day. They must buy it even though the price goes up. Similarly, they don 't increase their purchases of it even if the price drops.” (Amadeo, 2016). Some may consider a small portion of Coca Cola’s demand to be inelastic because there are some customers who are true to the products they enjoy and would still purchase Coca Cola products even when the price increases. The determinants of the price elasticity of demand are the availability of close substitutes, the passage of time, whether the goods are a luxury or a necessity, the definition of the market, and the share of the good in the consume...


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...ls such as environmentally friendly alternatives to plastic would be another recommendation. It could potentially lower their raw material costs as well as appeal to the eco-friendly demographics. The main concern for Coca Cola is water supply. Without water, Coca Cola would not be able to stay in business. It is recommended for Coca Cola to reduce the amount of water it uses. They have already begun a goal to improve water use. “Our 2020 goal is aggressive and builds on the 21.4% water efficiency improvement we’ve made since 2004. We expect to increasingly assess not just the quantity of the water used to grow our product ingredients, but the impact of that use as well” (Improving, 2016). All in all, Coca Cola is and has done successfully well throughout the years as they have a good control of the costs they incur and are always changing to apply to every audience.

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