Effect of Pepsi Price Increase on Coke Supply
Supply curve for Coke:
- The supply curve for Coke shows the quantity of Coke that producers are willing to supply at different prices.
- It slopes upward from left to right, indicating that as the price of Coke increases, producers are willing to supply more Coke.
Effect of Pepsi Price Increase:
- When the price of Pepsi increases, consumers may switch from Pepsi to Coke as a substitute.
- This increased demand for Coke will lead to an increase in the price of Coke.
- As the price of Coke increases, producers will be willing to supply more Coke at each price level.
- This will cause the supply curve for Coke to shift to the right, indicating an increase in the quantity of Coke supplied at each price level.
Graphical Representation:
- The supply curve for Coke will shift to the right, showing an increase in the quantity of Coke supplied at each price level.
- This shift will result in a new equilibrium point where the price of Coke is higher and the quantity of Coke supplied is greater.
- The new equilibrium will reflect the increased demand for Coke due to the price increase of Pepsi.
Overall Impact:
- The increase in the price of Pepsi has led to an increase in the supply of Coke, as producers respond to the higher demand for Coke.
- This demonstrates how changes in the price of related goods can impact the supply of a particular good in the market.