Illustrate on the graph the effect on the supply of coke when the price of pepsi increases?

Question

Answer

Effect of Pepsi Price Increase on Coke Supply

1. Demand for Coke:

When the price of Pepsi increases, consumers may switch to buying more Coke as a substitute.
This will lead to an increase in the demand for Coke.

2. Production Decision:

Coke producers will notice the increase in demand and may decide to increase their production of Coke.
This could involve utilizing more resources, hiring more workers, and investing in more equipment.

3. Supply of Coke:

Due to the increase in production, the supply of Coke in the market will also increase.
This will result in a rightward shift in the supply curve of Coke.

4. Equilibrium Price and Quantity:

As the supply of Coke increases, the equilibrium price of Coke will decrease.
The equilibrium quantity of Coke will increase as producers try to meet the higher demand.

5. Market Dynamics:

The increase in the price of Pepsi has indirectly caused an increase in the supply of Coke.
This demonstrates how changes in the prices of substitute goods can impact the supply and equilibrium in a market.