Answer to Question #108062 in Microeconomics for Bhumika Pinjani

Question

You are working for coco-cola as marketing head. The company is planning to float a new drink which is white in color. What lessons from the concept of elasticity can you draw while fixing the price for this new drink?

Answer 1

Elasticity is a measure of relative responsiveness of supply or demand to changes in one of the determinants of supply or demand. Economists use the concept in order to analyze the percentage change in supply or demand that occurs as a result of a 1 percent change in a determinant. While fixing the price for new product i would apply the concept of price elasticity of demand -measure of how much the quantity demanded responds to a change in price