User Account

All Pages

Relationship between cola magic and lemon heaven soda

Assignment Help Microeconomics
Reference no: EM13146114

  1. Consider the following information, produced by a market research agency, about a variety of soft drink your firm produces (Cola Magic) and a competitive model, Lemon Heaven Soda.

All the information relates to long term market adjustments.

  • Own price elasticity of demand for the Cola Magic is (-) 2.7
  • Cross price elasticity of demand with respect to Lemon Heaven Soda is + 3.2
  • Income elasticity of demand for Cola Magic target market is + 1.5

(a) Using the concept of cross price elasticity of demand, does your firm have market power in respect to Lemon Heaven Soda? Why or why not?

(b) Explain the relationship between Cola Magic and Lemon Heaven Soda.

(c) Explain what affect a 10% increase in the income of the targetmarket would be on the demand for the Cola Magic? 

(d) Your firm's accountant argues that because the demand for the Cola Magic is price elastic, the firm should drop its price. Briefly discuss this recommendation indicating if you would support this recommendation or not. What other factor(s) would have to be taken into account when giving your recommendation to management.

Reference no: EM13146114

Questions Cloud

Find probability that mean blackness of spots is less : Assuming that thedistribution has not changed from what it was in the past year, what is the probability that the mean blackness of the spots is less than 1.0?
Discuss in general the ethical issues : Discuss in general the ethical issues when employees are tempted to defraud their employer or when companies defraud the public.
Compute the heat of formation : Calculate the heat of formation, Hof, of pentane given that the Hof of H_2O(l) is -285.3 kJ mol-1 and Hof of CO_2(g) is -393.5 kJ mol-1
What will be the volume of dry nitrogen : A volume of 200mL of nitrogen is collected over water at a temperture of 24 degrees celcius and the atmospheric pressure of 100 kPa. What will be the volume of dry nitrogen at 24 degrees celcius and 125 kPa?
Relationship between cola magic and lemon heaven soda : Explain the relationship between Cola Magic and Lemon Heaven Soda and explain what affect a 10% increase in the income of the targetmarket would be on the demand for the Cola Magic?
Initial cash flow for expansion project : The company currently owns some unused equipment valued at $60,000. This equipment could be used for producing awnings if $5,000 is spent for equipment modifications. Other equipment costing $780,000 will also be required. What is the amount of th..
Aging of receivables analysis : Paloma Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis
Whats phase does the moon have to be in for : whats phase does the moon have to be in for a lunar eclipse to occur? solar eclipse.
Which variables are categorical and which are quantitative : Whether they voted for the Democratic or for the Republican candidate in the last congressional election. Which of these variables are categorical and which are quantitative?

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd