Suppose that 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 _____.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 item;the general public
C) no substitutes;necessity;the general public
D) several substitutes;necessity;the general public

Question

Quizplus · Accepted Answer

Vanilla Coke is a luxury item for loyal Coca-Cola customers because the quantity demanded falls by only 4% for them, indicating that they are less price-sensitive and view it as a special treat. For the general public, Vanilla Coke has several substitutes because the quantity demanded falls by 13%, indicating that they have other options available. Therefore, Coca-Cola will enjoy an increase in total revenue only from loyal Coca-Cola customers, as the price increase will outweigh the small decrease in quantity demanded for them.

Suppose That the Price of Vanilla Coke Increases by 9