In March 2012,the state of California started requiring that all packaging for food and drink with the additive 4-methylimidazole (4-MI)be clearly labeled with a cancer warning.Because of this,both Pepsi and Coke changed their formulas to eliminate 4-MI as an ingredient.If Pepsi and Coke did NOT change their formulas,holding all else constant,what do you think would have happened to the demand for these goods,assuming Pepsi and Coke were in a competitive market?

Question

Quizplus · Accepted Answer

The addition of a cancer warning label would likely decrease the demand for Pepsi and Coke with 4-MI as an ingredient, as consumers may perceive these products as being risky or unhealthy. In a competitive market, this would result in a shift of the demand curve for both products to the left, causing the price of both products to decrease and the profits for both companies to fall. Thus, if Pepsi and Coke did not change their formulas to eliminate 4-MI, the most likely outcome would be a decrease in demand for both products and a decrease in profits for both companies.

In March 2012,the State of California Started Requiring That All