Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall but only by 4% for loyal Coca-Cola customers. This means that for the general public there are _____ for Vanilla Coke, but for loyal Coca-Cola customers, Vanilla Coke is more of a _____ item. This means that Coca-Cola will enjoy an increase in total revenue only from _____.
A) several substitutes; necessity; loyal Coca-Cola customers
B) few substitutes; luxury; the general public
C) no substitutes; necessity; the general public
D) several substitutes; necessity; the general public

Question

Quizplus · Accepted Answer

The general public has several substitutes for Vanilla Coke, as indicated by the higher elasticity (13% drop in demand). Loyal Coca-Cola customers see it as a necessity, with a smaller drop in demand (4%). Coca-Cola will see increased revenue from loyal customers due to inelastic demand.

Suppose the Price of Vanilla Coke Increases by 9% and Quantity