Illustrate with an aid of diagram the effect on the supply of coke when the price of pepsi increases.?

Question

Answer

Effect of Pepsi Price Increase on the Supply of Coke

When the price of Pepsi increases, it will have an impact on the supply of Coke due to the following reasons:

Substitute Goods: Pepsi and Coke are considered substitute goods as they are similar products that can be consumed in place of each other. When the price of Pepsi increases, consumers may switch to Coke as a cheaper alternative, leading to an increase in the demand for Coke.
Profit Incentive: As the demand for Coke increases due to the higher price of Pepsi, producers of Coke will see a profit incentive to increase their supply to meet the rising demand. This will result in an increase in the supply of Coke in the market.
Production Costs: The increase in the supply of Coke may also be influenced by production costs. If the cost of producing Coke remains constant or decreases, producers will be more willing to supply more Coke at a higher price, resulting in an increase in the supply of Coke.
Market Equilibrium: Ultimately, the increase in the supply of Coke in response to the higher price of Pepsi will help to restore market equilibrium by balancing the changes in demand and supply for both products.