Answer to Question #226272 in Economics of Enterprise for sulo

Question #226272

You are the manager pf a firm that produces and markets a generic type of soft drink in a competitive market. In addition to the large number of generic products in your market, you also compete against major branch such as Coca-Cola and Pepsi. Suppose that , due to successful lobbying efforts of sugar producers in the Sri Lanka, Ministry of Finance is going to levy a Rs. 100 per Kg tariff on all imported raw sugar – the primary input for your product. In addition, Coke and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that their branded products are superior to generic soft drinks. How will these events impact the equilibrium price and quantity of generic soft drinks?


1
Expert's answer
2021-08-16T17:47:44-0400

The tariff leads to decrease in supply of sugar and hence the prices of sugar shall rise which form input products to soft drinks. Thus increasing soft drink prices will now lead to decrease in supply of generic soft drinks.

Now due to aggressive marketing by Coke and Pepsi the demand fir generic soft drinks shall reduce and hence the equilibrium quantity will reduce and so will the equilibrium prices.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS