I am not sure how to make my assignment for a supplier to my business (PepsiCo).
ID: 1127828 • Letter: I
Question
I am not sure how to make my assignment for a supplier to my business (PepsiCo). Let me know if you need any clarification.
"Presuming you have completed assignments 1, 2 and 4 (if not go do those first) do one of those assignments for a supplier to your business. Remember a couple of things.
Your business (and others like it) is now the consumer. That means questions about consumer income is now a question about your business' income. A question about consumer preferences is now a question about your business' preferences for what the supplier provides.
This is not about supply, but how a supplier to your business sees things. It is still about demand, price elasticity of demand, and market structure."
Here is my Assignment 1 Demand that I will be using for this:
1. I choose the Pepsi-Cola company. Their main product of service is manufacturing nonalcoholic beverage concentrates and syrups.
2.1) Suppose the company of PepsiCo cold drinks. The substitute of the Pepsi drink is Thumbs-Up Pepsi. If the price of Thumbs-Up Pepsi increases, then it will increase the demand for PepsiCo cold drinks which will shift the demand curve of Pepsi rightward.
2.2) Complementary goods are goods that are used together. The complementary good of PepsiCo is their bottle i.e. Pepsi is kept in a bottle and sold to the consumer. Suppose the price of bottles increases, then it will increase the price of Pepsi. Due to the increase in the price of Pepsi, the demand for Pepsi decreases which shifts the demand curve of Pepsi leftward.
2.3) If the income of a consumer increases, then it increases the purchasing power of the consumer. In turn, the consumer will demand more Pepsi which increases the demand for Pepsi. The demand curve of Pepsi shifts rightward.
2.4) Suppose the consumer preference changes. i.e. the consumer likes the taste of Thumbs-Up Pepsi more, then it decreases the demand for Pepsi which shifts the demand curve of Pepsi leftward.
2.5) The consumer expects that income will increase in the future. They will demand more Pepsi and it will increase the demand for Pepsi and shift the demand curve of Pepsi rightward.
2.6) Suppose the consumer expects that the price will fall in the future, so they will demand less in the current time-period. This decreases the demand for Pepsi and shifts the demand curve leftward.
2.7) If the number of buyers increases, then they will demand more Pepsi which increases the demand for Pepsi and shifts the demand curve rightward.
3. The demand for the product is increasing due to how consumer’s incomes are increasing, so they want more Pepsi/soda because they can afford it.
Here were the instructions for Assignment 1 that I originally used:
1. Pick a business that you know something about or can find information on. Describe the business and its main product or service.
2. For each of the factors that influence Demand listed below, describe how your main product or service (described in 1.) is affected.
2.1 Price of substitutes - What is a substitute for the product or service? Is the substitute's price increasing or decreasing? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.2 Price of complements - What is a complement for the product or service? Is the complement's price increasing or decreasing? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.3 Consumer Income - Is consumer income increasing or decreasing? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.4 Consumer tastes & preferences - How are consumer preferences changing? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.5 Consumer expectations of income - Do consumers expect their incomes to increase or decrease? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.6 Consumer expectations of price (of your product or service.) - Looking ahead, do consumers expect the price of your product or service to increase or decrease? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
2.7 Demographics - Number of Consumers (Buyers) - Is the number of buyers increasing or decreasing? How does this affect demand for your product or service and does it indicate that your demand is increasing or decreasing?
3. Based on your answers to 2.1 - 2.7, is the demand for your product or service increasing or decreasing? Why?
Explanation / Answer
1. Let us consider the demand for coffee. The firms in coffee industry is Costa Coffee. The best substitute of coffee is tea,. It has been observed in the market that price of substitute is decreasing. This decline in price of tea will decrease the demand for coffee. Thus, demand is decreasing with decrease in price of tea.
2.2 The best complement for coffee is sugar as sugar is the main ingredient used in making coffee. It has been observed that price of complements is increasing. This will lead to decline in demand for coffee as increase in price of sugar will also increase the price of coffee. Thus, demand is decreasing with the increase in the price of complement good.
2.3 Increase in income level of consumer will lead to increase in demand for coffee and thus shift the demand curve rightwards. Thus, coffee is a normal good as increase in income increases demand for coffee.
2.4 Consumer are liking the taste of coffee introduced by Costa Coffee, this has led to increase in demand of coffee and has shifted the demand curve of coffee rightwards. Thus, consumer's tastes and preferences shift the demand curve of coffee rightwards.
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