What Is the Price Elasticity of Demand for Petrol? Is It Elastic or Inelastic? How about Carbonated Drink?
Judging by the fact that there are very few alternatives for petrol in the present-day and that for cars which run on petrol no other fuel can be used, it can be considered that the price elasticity of demand for petrol is inelastic. However, as Suneja explains, with the invasion of the diesel-engine cars, the demand for petrol can possibly drop and, therefore, become more elastic.
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As for carbonated drinks, such as Coca Cola, it seems that the demand is not quite stable. On the one hand, fizzy drinks have nice flavors and are necessary elements of any children party, or even of a pleasant pastime for adults. However, it is still needed to keep in mind that many fizzy drinks taste much the same, with some recurrent flavors.
Of course, Coca cola stands out with its original formula, but its rival, Pepsi, is always there, which prevents Coca Cola to fix inelastic prices. The final argument in that chain is the fact that carbonated drinks are not indispensable to life. Hence, the price elasticity of demand for carbonated drinks is and will most likely stay elastic.
What Is the Income Elasticity of Demand for Carbonated Drink and Petrol? Which One Has the Higher Elasticity?
As for the income elasticity of demand, or the ratio between the change in quality of the goods and in the income of the consumer, as Jain and Khanna define this phenomenon (Jain and Khanna 46), it can be considered that the income elasticity of demand for the petrol is considerably lesser than the one for the Coca Cola.
Indeed, if considering the reasons that make people buy petrol and Coca Cola, one must mention that petrol, as it has been mentioned above, is used for a very specific reason, i.e., for using a car. Without a car, the life of an average citizen seems hardly comfortable, since a number of journeys will take considerably more time and will depend on other reasons than the schedule of the given citizen.
Hence, a car is an integrate element of an average man or woman’s life. Judging by the above-mentioned, one is likely to buy petrol even if his/her incomes drop. Likewise, even if the quality of petrol decreases, there will be no other substitute. Compared to petrol, Coca Cola is much less important, it has a number of rivals, and, thus, in case of a change in quality, people can simply stop consuming it or choose a different brand.
What Is the Cross Price Elasticity of Demand between Coke and Pepsi?
Since cross price elasticity can be defined as the ratio between the change in quantity of Coca Cola divided into the change in price in Pepsi and vice versa, the cross price elasticity of the two will make 0,7 (McEachern 116).
What Is the Cross Price Elasticity between Carbonated drink and Petrol?
As there is no palpable dependency between the two goods, they presumably have zero price elasticity.
Which Business Is a Better Business and If You Are Going to Invest in Stocks of These Companies, Which One Will You Prefer and Why?
As it has been mentioned, there has always been the need in petrol. Even with diesel engines, it seems that there is high demand for the given fuel. Hence, petrol production appears to be the most preferable for stocks investment.
Jain, Rohit and Op Khanna. Business Economics. New Delhi: FK Publications. 2008. Print.
McEachern, William A. Economics: A Contemporary Introduction. Stamford, CN: Cengage Learning. 2011. Print.
Suneja, Vivek. Markets: A Multidimensional Approach to the Market Economy. New York, NY: Routledge. 2000. Print.