Professor Osvaldo J. Sanchez
WA 2 Week 2
The Elasticity of Supply and Demand and Consumer Choice and Demand.
Why is the price of Coca-Cola greater than price elasticity of demand for soft drinks generally?
To start off, price elasticity of demand is defined as the measure of how responsive consumers are to a change in price. Elasticity stands for responsiveness as well. To simplify this measurement, you need to divide the measure of percent change in quantity demanded by the percentage change in price. Coca-Cola has a greater price elasticity demand than any other soft drink company because as many know, it is the most known and has the highest demand. From coke containing cocaine in its early days, to it becoming the first soft drink to go to space, it has travelled a very long way and it is very safe to say that it is the most wanted. CITATION Har18 l 1033 (Harvey, 2018) If you go to a fair or any big event, you start to notice more people consume Coca-Cola bottles over any other soda or soft drink. For example, the price of 330 ml can of coke will cost an individual $1.35, while a Dr. Pepper can with the same number of milliliters will sell for $1.65. This shows that the price elasticity of demand of Coca-Cola is very elastic because it is not going to get as affected with changes in price or can size than, as used in the example, Dr. Pepper.
Some restaurants offer “all you can eat” meals. How is this practice related of diminishing marginal utility? What restrictions must the restaurant impose on the customer in order to make a profit?
Utility is defined as the satisfaction or reaction you get from a certain service whether it is food, a movie, or even an uber ride. Like psychology teaches us, your preferences may be influenced by the environment around you, the culture you grew up in, and even genetics. Economists believe that an individual’s preferences and tastes are mostly stable keeping in mind that different people will have different opinions. Even though they are aware that the consumers opinions may change through time, they believe that it will remain stable enough to figure out what is the appropriate demand and price for their company. To say anything about the utility a consumer got from the product, economists will distinguish total utility (the total satisfaction from a product) and marginal utility (the change in total utility when product is altered.) The “all you can eat” meals allow companies to get a drop in marginal utility by giving them a variety of options and avoiding the feeling of repetitiveness. To make a profit, the company must appeal to the bigger crowd in a way that gives many options so that if the consumer were to change their mind, the company will still benefit and not lose much money with changes. CITATION Bri17 l 1033 (Britannica, 2017)References
BIBLIOGRAPHY Britannica, T. E. (2017). Marginal Utility. Britannica.
Harvey, O. (2018, August 28). 15 Insane Facts About Coca-Cola That You Probably Won’t Even Believe.
McEachern, W. A. (n.d.). Microeconomics, 10th Edition. Cengage.