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According to an article in the Wall Street Journal, reporting on Coca-Cola's results for the fourth quarter of 2016: "Higher pricing
According to an article in the Wall Street Journal, reporting on Coca-Cola's results for the fourth quarter of 2016: "Higher pricing ... drove revenue growth of 8%." Source: Jennifer Maloney and Anne Steele, "Coke's Profit Falls as Restructuring Continues," Wall Street Journal, February 9, 2017. Based on this information, is the demand for the beverages Coke sells price elastic or price inelastic? Briefly explain. A. Elastic, because a price increase raises the quantity demanded of Coke. B. Inelastic, because a price increase raises Coca-Cola's revenue. C. Elastic, because a price increase raises Coca-Cola's revenue. OD. Inelastic, because a price increase raises the quantity demanded of Coke.
Expert Solution
B. Inelastic because a price increase raises Coca-Cola's revenue.
Explanation:
According to an article in the Wall Street Journal,reporting on Coca Cola's results for the fourth quarter of 2016,"higher pricing ....drove revenue growth of 8%.Based on this information it can be stated that the demand for the beverage coke sells is inelastic because a price increase raises Coca-Cola's revenue.Demand is said to be inelastic when change in the price of the good or commodity causes no change in demand of its quantity.In this case,rise in price resulted in revenue growth of 8% which means that even when the price increased, quantity demanded by consumers remained static and thus revenue growth of 8% was achieved.
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