Demand and Supply of Coca-Cola-Samples for Students-Myassignment

Question: Discuss about the DEmand and Supply of Coca-Cola. Answer: Introduction The aim of this essay is to highlight on the demand and supply of Coca-cola. This product is a effervescent and most popular soft drink in the world. The Coca-Cola Company has produced various ranges of products and has become one of the familiar brand in the globe. Coca-Cola is considered as the substitute product as the consumers desire to switch to other good if its prices rises (Ruttan and Thirtle 2014). Both demand and supply of commodity depends on the product price and its demand for quantity. The market equilibrium occurs at the intersection point of the demand and supply curve of the commodity. This study also aid in exploring the variables that affect the demand and supply of coca-cola market. Discussion Demand for Coca- Cola The law of demand depicts that increase in price of the commodity leads to decline in its quantity demanded. Demand for a particular good refers to the commodity that the consumer desires to purchase over the certain period of time (Rios et al. 2013). It is usually represented that the demand curve is negatively sloped as the commodity price and its demand for quantity holds inverse relationship. The product quality and its brand value has increased the total number of customers around the globe. This has facilitated the organization in attaining higher revenue and profitability in this competitive market. Therefore, law of demand is illustrated with the help of the diagram shown below: Figure 1: Coca-cola s demand Source: (Authors creation) Supply of Coca-Cola The supply of the product represents the total amount of goods that the retailer is keen to supply in the present market. The law of supply portrays that rise in product price leads to increase in its quantity supplied with other variables remaining constant (Mankiw 2014). The reason behind increase in quantity supplied of goods is that the manufacturer wants to supply more product in order to attain profit. This law reflects that the price and quantity have positive relationships and this is depicted by positive slope supply curve. In this case, increase in Coca-Cola price leads to rise in its quantity supplied upto a particular level due to the presence of other constraint including existence of substitute products such as Pepsi. In the long period, if the manufacturers strategize to increase Coca-Cola price its quantity demand automatically decreases owing to presence of substitute goods in the competitive market. This is explained in the diagram below: Figure 2: Coca colas supply. Source: (Authors creation) Factors affecting demand and supply side of Coca-Cola Several factors influence the coca-cola demand in the market. These are: Relative product price-The demand for this good is affected by change in relative price product. There are many substitute products for Coca-Cola such as Pepsi, Sprite. However, if the price of this commodity rises while price of substitute goods remain constant then demand for coca-cola declines. Customers income- Customers income and its demand are directly related with each other. Therefore, rise in purchasers incomes leads to increase in its demand. Customers preferences- If the customers prefer coca-cola with respect to other product, then its demand remains unchanged irrespective to increase in its price (F et al. 2013). Policies adopted by government- Recent data reflect that the demand or coca-cola changes with the adoption of few measures by the government. However, if the government increases the tax on coca-cola, then its demand decreases. Time- Time is a crucial variable that influences the coca-colas demand in the market. Thus, its demands changes according to the seasonal change. Age group- This commodity is familiar in all age groups and hence is not influenced by its product demand (Baumol and Blinder 2015). In addition, rise in total population in the country also leads to rise in its demand. Brand reputation- Damage of Coca-Colas demand leads to decline in demand for its substitute products. However, Coca-cola enterprise tries to produce good quality products for attaining their trust and increasing their overall sales. The determinants that influences supply of coca-cola are given below: Commodities price- According to law of supply, rise in this product price creates willingness of the manufacturer to produce more commodities. Advancement of technology- The production cost of coca-cola decreases owing to advancement of technology in the process of production (Bauer 2014). The coca-cola organization introduces new technology in order to increase the efficiency of the worker and total productivity. Total number of customer- if huge number of customers is present in the market, the manufacturers aspire to produce more coca-cola for catering their wants. Input price- Input cost refers to workers and machinery cost in the business. Scarcity in this factors supply results to decline in the factor cost. Hence, the retailers want to supply more commodities at equal price. Demand elasticity The demand elasticity of the product refers to the change in demand for quantity with respect to change in goods price (Andini and Simatupang 2014). In case of elastic product, negligible change in product price leads to high change in demand for quantity. Coca-cola is considered as elastic product as its demand elasticity is greater than one. This is shown in the diagram below: Figure 3: Elasticity of coca-cola Source: (As created by author) Conclusion It can be concluded from the above study that the manufacturers set the product price according to its elasticity. If the product demand is elastic, the manufacturers strategize to lower the price for attaining higher revenue. On the contrary, if the goods demand is inelastic, the producers try to raise the price for gaining more revenue. Thus, the overall production cost lowers that augments to higher profit. Since Coca- cola product elastic, small rise in product price leads to incredible change in product demand due to availability of substitutes commodity in the competitive market. References Andini, R.A. and Simatupang, T.M., 2014. A process simulation of inventory planning and control for Minute Maid Pulpy at Coca-Cola.International Journal of Logistics Systems and Management,17(1), pp.66-82. Bauer, M.J.R., 2014. Principles of microeconomics. Baumol, W.J. and Blinder, A.S., 2015.Microeconomics: Principles and policy. Cengage Learning. Bustinza, O., C. Parry, G. and Vendrell-Herrero, F., 2013. Supply and demand chain management: The effect of adding services to product offerings.Supply Chain Mankiw, N.G., 2014.Principles of macroeconomics. Cengage Learning. Mankiw, N.G., 2014.Essentials of economics. Cengage learning. Rios, M.C., McConnell, C.R. and Brue, S.L., 2013. Economics: Principles, problems, and policies. McGraw-Hill. Ruttan, V. and Thirtle, C., 2014.The role of demand and supply in the generation and diffusion of technical change(Vol. 21). Routledge.