Aims and Objectives
The main aim of this project is to: * To determine the demand of three (3) different drinks, Coca Cola, Orchard and Sprite, as prices fluctuate. * To determine if the theory of price elasticity of demand is applicable to the demand of Coca Cola, Orchard and Sprite. * To determine the Price Elasticity of Demand of each of the three (3) different drinks; Coca Cola, Orchard and Sprite. * To investigate how revenues change as the prices of Coca Cola, Orchard and Sprite change.
Methodology The class decided that the Price Elasticity of Demand for three drinks were to be found. The three drinks were: Coca Cola, Orchard and Sprite. I then chose to investigate whether price elasticity of demand is
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The data collected was placed into the following table which was used to plot the graph below it.
Table 1 showing the demand of Coca Cola at prices ranging from $3.00 to $6.00
Graph 1 showing the demand for Coca Cola as price changes
CALCULATING PRICE ELASTICITY OF DEMAND-COCA COLA
Calculating price elasticity of demand when the price of Coca Cola increases from the original of $5.00 to $6.00 and the quantity demanded falls from 37 to 27.
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PED=Percentage change in quantity demanded of the good Percentage change in price of the good
Percentage change in quantity demanded of Coca Cola =-1037×1001~ -27.03%
Percentage change in the price of Coca Cola = +15×1001= +20%
PED=-27.03%+20%~ -1.35
PED= -1.35, this is greater than 1, therefore PED is elastic
Calculating price elasticity of demand when the price of Coca Cola decreases from the original of $5.00 to $4.00 and the quantity demanded rises from 37 to 54.
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PED=Percentage change in quantity demanded of the good Percentage change in price of the good
Percentage change in quantity demanded of
First, a quick review of Price Elasticity of Demand from lecture on 02/19/09. The definition, of Price Elasticity of Demand (PED) is: Price Elasticity of Demand = Percentage Change in Quantity Demanded = %ΔQD Percentage Change in Price
d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.
availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price
Explain the corresponding impact on total revenue for each of the three price ranges identified in part G.
14. When the price increases from $4 to $6 and the quantity demanded decreases by 2 units, the price elasticity of demand is
The rate of growth for PepsiCo has been pretty much more as compared to that of Coca Cola. The rate of increase in revenue of both the Coca Cola and PepsiCo was 6.26% and 11.11% respectively. In 2004, the cost of goods sold was $11031 while it was $12314 in the year 2005. The increased in sales lead to an increase in the cost of goods sold. In comparison to 2004’s data, the cost of goods sold stood at 111.63%. On the other hand Coca Cola had the cost of goods sold in 2004 at $7674 and in 2005 at $8195; and if seen in terms of percentages, for Coca Cola, the total cost of goods sold was $ 106.79%, which shows that an increment of 6.79% was seen in the year 2005 as compared to that of 2004.
1. College logo t-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10 it finds that it can sell 50 t-shirts per week. What is the price elasticity of demand for the logo t-shirts? Is the demand elastic or inelastic?
a) Elasticity of demand are circumstance at which a good or service varies according to prices. These circumstances measures consumers reaction and how they respond to the changes in price by changing the quantity demanded. (PE-of-D = (% Change in Quantity Demanded/% Change in Price)) – When the price for a number of units decreases from positive units pre-dollars to negative units per-dollars, the quantity of units sold increases.
Elasticity is a measure of the responsiveness of demand to changes in the price of a good or service. In the case of Steam Scot, when the price rises from 4 to 5, demand falls from 60,000 to 40,000 units. The original equilibrium market price of 4 pounds resulted in demand of 60,000 units and this generated revenue of 240,000 pounds. When the prices increased to 5 pounds the resulting demand is 40,000 units, and this generates total revenue of 200,000 pounds. When market price changes from 4 pounds to 5 pounds 40,000 pounds of revenue are lost in this indicates an elastic price elasticity of demand.
Based on the above description, forms of elasticity will affect business decisions and pricing strategies differently depending on the nature and type of products or services being offered. Business organizations whose product offerings have elastic and perfectly elastic price elasticities of demand should not attempt to raise prices of their products because it will cause the quantity demanded and consequently total revenues to drop drastically. Businesses can there use the price elasticities of demand to determine whether the proposed changes in their prices will raise or reduce their total revenue. The following expression may be useful in helping business organizations to determine the impacts of elasticities on their total revenues based on the suggested price changes.
Elasticity of demand helps the sales manager in fixing the price of his product, deciding the sales, pricing policies and optimal price for their products. The evaluation of this measure is a useful tool for firms in making decisions about pricing and production which will determine the total
Elasticity of demand represented as “Ed” is defined as a “measure of the response of a consumer to a change in price on the quantity demanded of a good” (McConnell, 2012). Determinants for elasticity of demand would include the substitutability of a good, proportion of a consumer 's income spent on a good, the nature of the necessity of a good and the time a purchase is under consideration by the consumer. Furthermore, elasticity of demand is calculated with this formula:
If the demand for companies output is inelastic then the change in price will have a smaller effect on change of quantity. Let’s say company will cut the price for 10 percent. This will cause the increase in demands for 5
Recall that the elasticity of demand, which measures the responsiveness of demand to price, is given by