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Market Conditions Competitive Analysis

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Market Conditions Competitive Analysis
Taze Vega
ECO/365
October 20, 2014
John Bayer

Market Conditions Competitive Analysis
Factors Affecting Variable Costs

Variable costs, as defined by Collins Dictionary of Economics (2006), are production costs that can change depending on the amount of output. Variable costs in manufacturing soft drinks would be packaging, labor (overtime costs), energy usage and raw materials. Of these, raw materials such as sugar used in making the product would be the cost that varies the most. The Law of Supply states that if the demand of an item rises then the price of that item will also rise (Colander, 2013). Therefore, if the demand for sweeteners were to rise then the price of raw materials would also rise. This would increase the cost of manufacturing the soft drink. The cost of productivity and labor would rise if for some reason the demand for the coke product was to rise also. The reason for this is that to fulfill the rising demand, Coca-Cola would have to increase the amount of employees working which would increase the cost of productivity due to energy usage and labor costs.
Factors Affecting Fixed Costs
According to Collins Dictionary of Economics (2006), fixed costs are production costs that do not change and are not affected by the volume of activity or the quantity of production. Some examples of fixed costs are rent, overhead and payroll. There are factors that may, at times, affect the changes of fixed costs. These factors include changes in the business organization, changes in technology used or the sale of manufacturing equipment. Unless Coca-Cola plans on opening another bottling plant or opening a new office location their fixed costs should not change in the near future.

References
Colander, D. C. (2013). Microeconomics (9th ed.). New York, NY: McGraw-Hill.
Fixed costs. (2006). In Collins

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