2. Elasticity question
a) Explain why a PepsiCo Sales Executive would benefit from understanding cross elasticity of demand and elasticity of demand when evaluating a recommendation to lower the price of Doritos.
i) How does understanding cross elasticity of demand and elasticity of demand support better decision-making?
b) Explain why an analyst working for the Anti-Trust Division of the Justice Dept. would benefit from understanding cross elasticity of demand when evaluating the proposed merger of Coca Cola Company and Pepsi.
i) How does understanding cross elasticity support better decision-making by the analyst?
2. Elasticity question
a) Explain why a PepsiCo Sales Executive would benefit from understanding cross elasticity of demand and elasticity of demand when evaluating a recommendation to lower the price of Doritos.
i) How does understanding cross elasticity of demand and elasticity of demand support better decision-making?
b) Explain why an analyst working for the Anti-Trust Division of the Justice Dept. would benefit from understanding cross elasticity of demand when evaluating the proposed merger of Coca Cola Company and Pepsi.
i) How does understanding cross elasticity support better decision-making by the analyst?
Related textbook solutions
Related questions
1. How does the profit maximization condition for a monopoly differ from that for a perfectly competitive firm? How does this difference impact efficiency under each market structure?
2. A perfectly competitive firm has the following fixed and variable costs in the short-run. The market price for the firm's product is $140.
Output FC VC TC TR Profit/Loss
0 $90 $0 90 0 (90)
1 90 90 180 140 (40)
2 90 170 260 280 20
3 90 290 380 420 40
4 90 430 520 560 40
5 90 590 680 720 20
6 90 770 860 840 (20)
a. Complete the table.
b. What level of output should the firm produce to maximize profits?
c. Assume this firm is making a loss when it produces its 7th unit of output. What should the firm do in the short-run?
3. The following table provides market share information about the soft-drink industry.
| Company | Market Share |
| Coca-Cola | 37% |
| Pepsi-Co | 35% |
| Cadbury Schweppes | 17% |
| Other | 11% |
a. Do you think the Department of Justice and the Federal Trade Commission would approve a merger between any two of the first three companies listed? Explain.
b. Do you think this market has barriers to entry? If so, what might they be?
