Why is the price of elasticity of demand for coca cola greater than the price of...

Why is the price of elasticity of demand for coca cola greater than the price of elasticity of demand for soft drinks generally?

Expert Solution

--> The price elasticity of demand measures the change in the quantity demanded of a good or service due to a change in the price of the product. It is calculated by dividing the percentage change in the quantity demanded by the percentage change in the price of the product.

-->generally demand is more elastic if consumers are more responsive to price changes. In general, demand is more elastic if more substitutes exist for a consumer to switch to in response to price increases. Therefore, the more narrowly defined the market is, the more elastic demand is. In this example, the market for Coca-Cola is more narrowly defined than the market for soda in general. If the price of Coca-Cola increases, consumers have the ability to choose from many alternatives, including different types of soft drinks. In the market for soft drinks in general, on the other hand, there are not many substitutes, so consumers don't have the ability to easily switch to an alternative in response to a price increase. Therefore, the market for Coca-Cola is more elastic than the market for soft drinks in general.

Rahul Sunny answered 2 years ago

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