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NAME
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Introduction
PepsiCo, Inc. It is an American company that manufactures lots of food and snacks based
in New York City. PepsiCo is concerned with the manufacture, marketing and distribution of
cereal-based snacks, beverages and other products. PepsiCo was incorporated in 1965 with the
merger of Pepsi-Cola and Frito-Lay, Inc. Since then PepsiCo has expanded its Pepsi product into
a broader range of food and beverage brands, the largest of which included buying Tropicana
products in 1998 and Quaker Oats in 2001, which added the Gatorade brand to its portfolio.
Demand Analysis:
The demand equation for the Mobility services for PepsiCo. is given by
Px = 7 (1/2) * 3*Q
x
d
The graph below shows the demand curve for PepsiCo.
Shift in demand:
0
1
2
3
4
5
6
7
8
0 1 2 3 4 5
Demand Curve
Pric
Quantity
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The three most important demand shifters are:
1. Price of Substitutes
Some goods like Pepsi have substitutes; thus, a change in the price of one product affects
the demand for another product. Coke is a perfect example of a Pepsi drink substitute. If the
price of a Coke drink decreases, consumers will purchase more Coke drinks and fewer Pepsi
drinks. Consequently, the demand curve for Pepsi decreases by shifting to the left from DD toD2
D2. Conversely, if the price of Coke increases, consumers will purchase less Coke and more
Pepsi. Consequently, the demand curve for Pepsi increases by shifting to the right from DD to
D1D1.
2. Change of Income of Consumers
Human beings are rational and tend to spend more as income increases. As the
consumer's income increase, they tend to buy refreshing and expensive drinks in bulk rather than
cheap drinks. Therefore, the demand curve for Pepsi drink increases by shifting to the right from
DD toD1 D1. Conversely, as the consumer's income decreases, consumers less-refreshing and
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cheap drinks in low quantities; therefore, the demand curve for Pepsi drinks decreases by shifting
to the left from DD toD2 D2.
3. Change in Consumer Taste and Preference
Consumers' tastes and preferences change over time, depending on factors such as
fashion. An increase in consumer preference for Pepsi drinks increases the demand for Pepsi thus
the demand curve shifts to the right from DD toD1 D1. However, a decrease in consumer
preference for Pepsi decreases the demand for Pepsi thus the demand curve shifts to the left from
DD toD2D2.
Cost Analysis:
The supply equation for PepsiCo. is
Px = 7 + Q
x
d
1. The Price of Inputs
0
2
4
6
8
10
12
14
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Y-Values
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Caffeine and natural flavorings are one of the inputs of making Pepsi drink. When prices
of natural flavorings increase (inputs), the production costs increase. The end product (Pepsi)
becomes less profitable; hence firms reduce their supply shifting the supply curve to the left. In
contrast, a decrease in the prices of inputs such as natural flavorings decrease the production
costs; therefore, the supply curve shifts to the right (increase in supply).
2. Technological Changes
The use of advanced technology in the production process increases productivity and
efficiency, making goods more profitable. Consequently, the firms supply more in the market,
shifting the supply curve to the right (increase in supply).
3. Regulatory Costs
Regulatory costs increase the cost of production, and the profitability of the product
decreases; hence firms supply less, shifting the supply curve to the left. Conversely, the decrease
in regulatory costs decreases the cost of production; hence the profitability of products increases.
Consequently, firms supply more, shifting the supply curve to the right.

Unformatted Attachment Preview

1 NAME 2 Introduction PepsiCo, Inc. It is an American company that manufactures lots of food and snacks based in New York City. PepsiCo is concerned with the manufacture, marketing and distribution of cereal-based snacks, beverages and other products. PepsiCo was incorporated in 1965 with the merger of Pepsi-Cola and Frito-Lay, Inc. Since then PepsiCo has expanded its Pepsi product into a broader range of food and beverage brands, the largest of which included buying Tropicana products in 1998 and Quaker Oats in 2001, which added the Gatorade brand to its portfolio. Demand Analysis: The demand equation for the Mobility services for PepsiCo. is given by Px = 7 – (1/2) * 3*Qxd The graph below shows the demand curve for PepsiCo. Demand Curve 8 7 6 Pric 5 4 3 2 1 0 0 1 2 Quantity Shift in demand: 3 4 5 3 The three most important demand shifters are: 1. Price of Substitutes Some goods like Pepsi have substitutes; thus, a change in the price of one product affects the demand for another product. Coke is a perfect example of a Pepsi drink substitute. If the price of a Coke drink decreases, consumers will purchase more Coke drinks and fewer Pepsi drinks. Consequently, the demand curve for Pepsi decreases by shifting to the left from DD toD2 D2. Conversely, if the price of Coke increases, consumers will purchase less Coke and more Pepsi. Consequently, the demand curve for Pepsi increases by shifting to the right from DD to D1D1. 2. Change of Income of Consumers Human beings are rational and tend to spend more as income increases. As the consumer's income increase, they tend to buy refreshing and expensive drinks in bulk rather than cheap drinks. Therefore, the demand curve for Pepsi drink increases by shifting to the right from DD toD1 D1. Conversely, as the consumer's income decreases, consumers less-refreshing and 4 cheap drinks in low quantities; therefore, the demand curve for Pepsi drinks decreases by shifting to the left from DD toD2 D2. 3. Change in Consumer Taste and Preference Consumers' tastes and preferences change over time, depending on factors such as fashion. An increase in consumer preference for Pepsi drinks increases the demand for Pepsi thus the demand curve shifts to the right from DD toD1 D1. However, a decrease in consumer preference for Pepsi decreases the demand for Pepsi thus the demand curve shifts to the left from DD toD2D2. Cost Analysis: The supply equation for PepsiCo. is Px = 7 + Qxd Y-Values 14 12 10 8 6 4 2 0 0 0.5 1. The Price of Inputs 1 1.5 2 2.5 3 3.5 4 4.5 5 5 Caffeine and natural flavorings are one of the inputs of making Pepsi drink. When prices of natural flavorings increase (inputs), the production costs increase. The end product (Pepsi) becomes less profitable; hence firms reduce their supply shifting the supply curve to the left. In contrast, a decrease in the prices of inputs such as natural flavorings decrease the production costs; therefore, the supply curve shifts to the right (increase in supply). 2. Technological Changes The use of advanced technology in the production process increases productivity and efficiency, making goods more profitable. Consequently, the firms supply more in the market, shifting the supply curve to the right (increase in supply). 3. Regulatory Costs Regulatory costs increase the cost of production, and the profitability of the product decreases; hence firms supply less, shifting the supply curve to the left. Conversely, the decrease in regulatory costs decreases the cost of production; hence the profitability of products increases. Consequently, firms supply more, shifting the supply curve to the right. Name: Description: ...
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