Supply, Demand Conditions and Price Elasticity of Demand

Categories: BusinessCoca Cola

In this day and age more and more people are becoming more health conscious. This has caused the demand for soda like Coca-Cola to decline, as more consumers are leaning towards healthier products. Consumers are more conscious about what they intake and they are choosing products with way less sugar and artificial sweeteners. “the compound annual growth rate (CAGR) for the U.S. CSD market declined 1.6 percent from the 2012-2017 timeframe.” (Jacobsen, 2019) The carbonated drink industry has taken one of the largest hits.

Below is a visual graph that shows the decline in Coca- Cola products from 2013 to 2017 (Desjardins, 2018)

Of course, this is not good news for Coca-Cola. This decline has forced Coca-Cola to rethink and change up their marketing strategy overall. The Coca-Cola Company offers several other options than just soft drinks, they have created other options that have less sugar and are more appealing to the health-conscious consumers. Some of these items are Smart water, Vitamin water, Powerade sports drink and Desani water.

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The company strives to keep consumers happy and healthy and they have made it a point to create beverages with reduced sugars and reduce the sizing of their cans in effort to still give consumers the same great product, just in a small amount. (“Coca-Cola Sustainability Report”,2019)

Price Elasticity of Demand

Price Elasticity of demand is determined by dividing the percentage change in demand quantity by the percentage change in price and shown in the below figure (Price Elasticity Formula). The Coca-Cola Company’s demand is very elastic.

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A small price change is something that could possibly have a huge impact on the company, and possibly hinder Coca-Cola to fall while up against other competitors. How many competitors that Coca-Cola is up against is a huge factor in the company’s elasticity. If one of the competitors such as Pepsi Co. has their products for a cheaper price, then more consumers are more likely to go and purchase a Pepsi rather than Coca-Cola. Basically, the higher the price of a product, the less the consumer will demand. There are also several substitutes for Coca-Cola with a cheaper price, if a consumer is not able to purchase the name brand product, they shoot for the next best thing, which is the “off-brand” of a product. (Fixingtheeconomist.wordpress.com, 2016)

In order for Coca-Cola to continue to stay on top and remain successful they would need to always be aware of the market and their competitor’s prices. If their prices are higher than most competitor’s, then consumers are likely to go with the product of a cheaper price in order to save money. Time plays another important factor. It effects the demand of a product, the demand of Coca-Cola goes up during holidays, summer and festive seasons (SlideShare, 2019).

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Supply, Demand Conditions and Price Elasticity of Demand. (2021, Apr 23). Retrieved from https://studymoose.com/supply-and-demand-conditions-and-price-elasticity-of-demand-essay

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