Demand for Pepsi Consider the price-setting power of firms in a unique time in history, post-pandemic amidst an outbreak of high inflation (2022 to mid-2023), followed by a steady period of relatively moderate inflation in recent months. We shall focus on the beverage giant, PepsiCo. Scenario 1: Assume the firm increased price of their Pepsi fizzy drink by 25% over 2022-2023. Draw a single straight-line demand curve and explain the relevant details on the price elasticity of demand (PED). Show the workings of your calculation of PED. Describe and quantify what would happen to revenue in this case. In your answer, use hypothetical incremental values (rough guesses from your imagination) for the prices on the y-axis and quantities on the x-axis. Scenario 2: Assume the firm increased price of their Pepsi fizzy drink by 5% in first quarter of 2024. Draw a single straight-line demand curve and explain the relevant details on the price elasticity of demand (PED). Show the workings of your calculation of PED. Describe and quantify what would happen to revenue in this case. In your answer, use hypothetical incremental values (rough guesses from your imagination) for the prices on the y-axis and quantities on the x-axis.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter6: Demand And Elasticity

Section: Chapter Questions

Problem 6DQ

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Demand for Pepsi

Consider the price-setting power of firms in a unique time in history, post-pandemic amidst an outbreak of high inflation (2022 to mid-2023), followed by a steady period of relatively moderate inflation in recent months. We shall focus on the beverage giant, PepsiCo.

Scenario 1: Assume the firm increased price of their Pepsi fizzy drink by 25% over 2022-2023.

Draw a single straight-line demand curve and explain the relevant details on the price elasticity of demand (PED).
Show the workings of your calculation of PED.
Describe and quantify what would happen to revenue in this case.
In your answer, use hypothetical incremental values (rough guesses from your imagination) for the prices
on the y-axis and quantities on the x-axis.

Scenario 2: Assume the firm increased price of their Pepsi fizzy drink by 5% in first quarter of 2024.

Draw a single straight-line demand curve and explain the relevant details on the price elasticity of demand (PED).
Show the workings of your calculation of PED.
Describe and quantify what would happen to revenue in this case.
In your answer, use hypothetical incremental values (rough guesses from your imagination) for the prices
on the y-axis and quantities on the x-axis.

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