What would be the consumer buying response to Coca-Cola if the price of Pepsi doubled?
Consumers respond to significant price changes. In a study by The American Journal of Public Health, it was found that small price increases, via taxes, did not significantly affect soda consumption. Therefore it is safe to say that when the price of soda goes up, consumption of the beverage goes down (Leonhardt, 2010). Consumer's are likely to buy more of Coca Cola and very little if any of Pepsi because the products are so similar. Although some consumer’s would not change their buying option because the prices of one of the beverages increase in price because they are loyal consumers to that product. Because it is a very competitive market, it may be logical to say that people that prefer Pepsi would not mind paying extra instead of going for the cheaper substitute. The two are weak substitutes for each other and to those loyal consumers, a price increase of one will little effect the sale of the other.
If the prices of Coca-Cola and Pepsi remained constant, what would be the consumers typical buying response to these products if their income was reduced by 30%?
When reducing an income of a family by 30% most families look at ways to budget, but when reading several online blogs about “living on a budget” most families start their cuts with cable television, smaller cell phone packages, cutting back on haircuts / colors or things of that nature. Ideally, consumers would replace Coca Cola and Pepsi with less expensive substitute products such as tea, coffee, juice, water, sprite etc. Consumers may also reduce the quantity of the beverage that they usually buy. However some consumer have an addiction or craving for Pepsi or Coca-Cola that is hard to let go they would not stop buying that product. These consumers can exchange the Pepsi or Coca-Cola for something