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Find the aggregate demand for coca cola for group a

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Reference no: EM132518937

Assume Coca Cola segments the market into two groups- Group A and B. Assume that consumers in Group A and B have preferences

UA(x, C) = C0.2 x0.8

UB(x, C) = C0.7 x0.3

Where x: is quantity of product x and C is the quantity of 200 ml Coca Cola.

If the average income in Group A is $ 80,000 per month and that of Group B is $ 40,000 per month and price of x is $ 1. Assume group size of A is 100 and that of B is 50.

(For Group A: MUC  = 0.2C-0.8X0.8 ; MUX  = 0.8C0.2X-0.2 )

(For Group B: MUC  = 0.7C-0.3X0.3 ; MUX  = 0.3C0.7X-0.7 )

- Find the aggregate demand for coca cola for group A.

2. Find the aggregate demand for coca cola for group B .

3. Find the aggregate demand for coca cola.

Part 2:

Assume that Coca Cola has dropped the idea of differential pricing but is mindful of the  segmented market.

All Coca-Cola's beverages in 200 ml bottles will be sold at a flat $ 10, down from $ 15 .

-Find the arc elasticity in this range for the aggregate demand curve.

-How will revenue change for Coca-Cola based on your analysis?

Reference no: EM132518937

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