Essay: Analyzing Demand, Supply, and Elasticity for Coca-Cola Products

This essay provides a comprehensive analysis of the demand and supply dynamics of Coca-Cola, a globally recognized soft drink. It begins by defining the law of demand and how it applies to Coca-Cola, explaining the inverse relationship between price and quantity demanded. The essay then explores the supply side, illustrating the positive relationship between price and quantity supplied. Key factors influencing both demand and supply are discussed, including relative product prices, customer income, preferences, government policies, time, age groups, and brand reputation. The analysis extends to demand elasticity, classifying Coca-Cola as an elastic product. The essay concludes by summarizing the importance of understanding elasticity for pricing strategies and overall profitability, emphasizing the impact of substitute products in the competitive market. The essay includes figures illustrating demand and supply curves, as well as elasticity, supporting the economic concepts discussed.

Running head: DEMAND AND SUPPLY OF COCA-COLA
DEMAND AND SUPPLY OF COCA-COLA
Name of the Student
Name of the University
Author’s Note

1DEMAND AND SUPPLY OF COCA-COLA
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Demand for Coca- Cola...............................................................................................................3
Supply of Coca-Cola....................................................................................................................4
Factors affecting demand and supply side of Coca-Cola............................................................5
Demand elasticity........................................................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

2DEMAND AND SUPPLY OF COCA-COLA
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:

3DEMAND AND SUPPLY OF COCA-COLA
Quantity demanded of Coca-Cola
Coca-Cola price
P
P1
Q1 Q
Figure 1: Coca-cola ‘s demand
Source: (Author’s 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

4DEMAND AND SUPPLY OF COCA-COLA
S
D1
D
Q Q1
P
P1
Quantity supplied for Coca-cola
Price of Coca-cola
decreases owing to presence of substitute goods in the competitive market. This is explained in
the diagram below:
Figure 2: Coca cola’s supply.
Source: (Author’s 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.

5DEMAND AND SUPPLY OF COCA-COLA
 Customers income- Customers income and its demand are directly related with each
other. Therefore, rise in purchaser’s 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-cola’s 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-Cola’s 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.

6DEMAND AND SUPPLY OF COCA-COLA
P
P1
Q Q1 Quantity of coca-cola
Price of coca-cola
E>1
 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

7DEMAND AND SUPPLY 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 substitute’s commodity
in the competitive market.

8DEMAND AND SUPPLY OF COCA-COLA
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.
F. 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 Management: An
International Journal, 18(6), pp.618-629.
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.