ECO204 Discussion 2 Week 1 Coke Versus Pepsi

If Coke’s price increases, what will happen to the demand or quantity demanded for Pepsi, all other things being equal?

If Coke increases prices, then Pepsi’s quantity demand would increase until Coke’s prices dropped again.

Explain whether it is a movement along the demand curve or a shift of the demand curve.

“Movements along the curve are changes in quantity demanded, caused solely by a change in the price of the good,” (Amacher & Pate, 2019, sec. 3.1). So, Coke’s change in price would result in a movement along the demand curve. Shifts of the curve occur only when any factor other than price influences the demand curve (Amacher & Pate, 2019).

If Coca-Cola develops a new technology that makes Coke tastier, what will happen to the supply curve and demand curve for Coke?

If Coke improved the taste of their product then we would see a shift of the demand curve and a shift of the supply curve. A larger quantity of Coke would be sold so a larger quantity of supply would be necessary. This would be reflected with a shift of the supply curve especially if Coke increased the price of the newly improved product because supply curves increase relative to price. “As prices rise, the quantity supplied will increase because it becomes more profitable to produce and sell the good,” (Amacher & Pate, 2019, sec. 3.2). Even if the price remains constant and only the taste is a factor, the demand for the product would most likely increase which would cause a positive shift in both the supply curve and the demand curve.

Is the demand (curve or schedule) for Coke or Pepsi seasonally different?

All businesses are affected by seasons regardless of product. In this case, carbonated beverages are generally best enjoyed as a cold beverage. Summertime when temperatures are high, sales for Coke and Pepsi will be higher than in the winter. The increase may not be record-breaking, but nonetheless more Coke and Pepsi products would be sold during times of the year when temperatures are higher. This could also prove true during holidays world-wide. Coke is well-known for its Christmas marketing involving the polar bears around the holidays.

What is the relationship between Coke and Pepsi? Do they have the same demand curve or are they different? Explain your reasoning.

Coke and Pepsi are both carbonated beverage companies with many products that are similar by comparison. As mentioned previously, if Coke’s prices increase, Pepsi’s quantity demand increases, Coke would have a movement along its demand curve, and Pepsi would see a movement along its demand curve as well. Essentially, the two demand curves would “sway” back and forth as each company lowered/increased the prices of their product. For example, my neighborhood grocery store will have a sale on Coke products one week and the following week Pepsi is on sale. These sales go back and forth for one-week increments throughout the year, especially during the summer months. So, each week one would see a movement with each of the company’s demand curves reflective of their prices in comparison to their competitor’s pricing.

Lauren

References

Amacher, R. and Pate, J. (2019). Principles of microeconomics (2nd ed.). Retrieved from https://content.ashford.edu