The Market Dynamics for Coca Cola Company
The market dynamics for different products and services in the market are diverse. Therefore, the purpose of this essay paper is to analyze the market dynamics for the Coca Cola company. The demand of a product can be influenced by many factors: taste and preference and change in price of related goods. Taste and preferences of consumers are subject to constant change. It causes an increase in the demand of a product from increased advertisements and publicity thus resulting in a shift of the demand curve upwards this means that there is an increase in both equilibrium price and quantity (Guru, nd). However, decreased demand results in a decrease in equilibrium price and quantity of the product.
Factors that Influence Demand
Another factor that causes a shift in demand of a product, Coca cola, is the prices of other related goods, in this case other beverages. When the prices of other beverages say coffee or tea changes, it might cause a shift in the demand curve of Coca cola either upwards or downwards. An increase in the price of related goods results to an increase in the equilibrium price and quantity purchased (Guru, nd). Nonetheless, a decrease in the prices of related products will also result in a decline in equilibrium prices and quantity purchased of the product.
Factors that Determine Supply
The supply of a product in the market is subject to factors such as price and cost of production. Prices of a product in the market greatly determine the supply to the market. When the prices of the product are high, it means that more of the product will be supplied. However, lower prices for the product in the market causes a decrease in supply. An increase in supply due to increased prices causes a shift to the right in equilibrium price and quantity on the supply curve (Nitisha, nd). On the other hand, when prices fall and less of the product is supplied the supply curve shifts equilibrium price and quantity to the left.
The cost of producing a product greatly determines its supply. The cost of production can be determined by other factors such as wages, cost of raw material, and tax rates. When the cost of production is high, it means that less of the product is supplied. This therefore results in a decline in the equilibrium prices and quantity supplied (Nitisha, nd). On the other hand, when the cost of production is lowered, more of the product is supplied in the market. This also causes a shift in the equilibrium price and quantity supplied to the right.
Elasticity of Demand and Supply
The demand curve and the supply curve both indicate the relationship between prices and quantities either demanded or supplied. Price elasticity represents the ratio between the percentage changes in the quantity of goods supplied or demanded to the consequent percentage changes in the prices. The elasticity of a product can be classified into either elastic, unitary or inelastic (Pal, nd). If the elasticity of a product is less than one, then its responsiveness to changes in price are low and therefore correspond to inelastic supply or demand. An elastic supply or demand indicates that its elasticity is larger that one. Finally unitary elasticity of a product equals to one. This means that the percentages in the quantities demanded or supplied equals the percentage changes of the price for these products.
Impacts of Taxes on Consumers, Producers and Market Efficiency
Taxes are imposed on products by the government so that they can earn revenue. However, taxes greatly influence the dynamics of prices and quantities for consumers, producers and the market. When taxes are imposed on a product, more often than not, the impact is negative on consumers and producers. For consumers imposed taxes mean that the price of the product will definitely be higher and thus they will be less willing to pay for the extra costs (Long, 2017). Equally, producers donot benefit from imposed taxes since the at times they may e unable to distribute the taxes and pass them to consumers, which means that they will shoulder the burden of covering the added taxes.
Market Structure and Marketing Strategies
The Coca Cola company being under the beverage industry, certainly falls under the oligopoly market structure. They're only a limited number of beverage companies that enter into this market structure. This is due to the barriers for entry as a result of high costs associated with advertising, marketing as well as investments. However, producers in this niche achieve success since they incorporate product differentiation, provide better packaging for the products and their products are consumed worldwide (Octotutor, 2014). Similarly, Coca Cola has recently introduced a product that caters for individuals who are more cautious about their health. That is the Coca Cola Zero, which contains less calories. Implementation of these strategies helps producers to compete more effectively within the market.
References
Guru, S. (nd). 7 Factors which Determine the Demand for Goods. Retrieved from http://www.yourarticlelibrary.com/economics/law-of-demand/7-factors-which-determine-the-demand-for-goods/36633 on 12th June 2018.
Long, N. (2017). What Happens to a consumer and a Producer’s Surplus When a Good Is Taxed? Retrieved from https://bizfluent.com/info-12094297-happens-consumer-producers-surplus-good-taxed.html on 12th June 2018.
Nitisha, (nd). 8 Factors that Influence the Supply of a Product. Retrieved from http://www.economicsdiscussion.net/supply/8-factors-that-influence-the-supply-of-a-product/3369 on 12th June 2018.
Octotutor, (2014). Differentiating Between Market Structures - Coca-Cola Company. Retrieved from https://octotutor.com/the-market-structure-of-the-coca-cola-company/ on 12th June 2018.
Pal, D. (nd). Elasticity of Demand and Supply (With Diagram). Retrieved from http://www.economicsdiscussion.net/elasticity-of-demand/elasticity-of-demand-and-supply-with-diagram/16244 on 12th June 2018.
