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Wednesday, 21 November Elasticity of Demand There are many types of products with elastic demand and inelastic demand. For example, groceries, car and branded goods are all elastic products. However, there are also determinants that affect the elasticity of demand, such as the level of income and price of related goods.
If the level of income decreases, people will tend to decrease their consumptions by putting their priority in necessities instead of luxuries or wants, changing their demand into inelastic.
If the price of petrol increase, the demand for car will be more elastic. Let us discuss more specific about the two types of substitute products: Pepsi and Coca Cola.
These products are also considered as luxuries because they are not the necessities of human.
Luxuries-type products are mainly under elastic demand. They had been competing to get the best price to offer to the market for ages! Of course, the consumers will always choose the cheaper brand.
To illustrate, when the price of Coca Cola decrease and is lower than Pepsi, consumers will buy Coca Cola instead of Pepsi. Elastic Demand On the other hand, products with inelastic demand are the one that we need in our daily life. For instance, the necessities that we need are electricity, water and petrol; for heavy smokers, cigarettes is a must in their life.
Without these, our daily life will be affected, that is why we purchase them even if the price of products increased and same goes to heavy smokers.
Changes in price will not affect the quantity demanded too much. For example, one of the important energy sources would be petrol which is used to run the engine in our transport. A few months ago, the price of petrol increased, yet people unable to cut down the usage of petrol as it will affect the transportation to work and it will lead inconvenience.
So, inelastic demand can shown by the diagram below. Although the price of petrol increase, the quantity demanded decrease in a small portion.
Inelastic Demand In conclusion, elasticity is used to measure the responsiveness from the consumer towards the changes in economic variables, such as price and level of income, plus the other determinants such as the substitutes available in the market and luxuries vs.Here are the numbers I got (please check them; there may be numerical errors): Elasticity Elasticity of Demand for with respect to Coke Pepsi Own price − − Other’s price PepsiCo makes no representation or warranty as to the accuracy of any cost basis calculation made using NetBasis or the information on the NetBasis website.
PepsiCo urges you to consult your tax adviser about your tax basis in your PepsiCo stock. PepsiCo's Beginnings. PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay.
Pepsi-Cola was created in the late s by Caleb Bradham, a New Bern, N.C.
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Income elasticity measures the change in the quantity consumers' demand of a product when consumers' income changes. Soda is a normal good; therefore if the income increases for example, the quantity demanded of the product should increase as a result.
The Coca-Cola Company’s main competitors include, PepsiCo and Dr Pepper Snapple Group. Supply and Demand Analysis When the price of a substitute, i.e. Pepsi.