Sunday 26 October 2008

Smoothies and cola

AD (a) The demand for coca-cola was influenced by the fact that the consumers were not aware of the negative externality that the drink causes, so when there was campaign was supposed to encourage healthier eating, the demand contracted. As this campaign was promoting healthier food, and smoothies were advertised as a healthy food by its supplier, the demand for smoothies naturally expanded. This growth in demand is caused also by asymmetric information – the average consumer does not know what is the real effect of consuming smoothies

AD (b) The campaign effected growth in demand for smoothies, end contraction in demand for fizzy drinks like coca-cola

AD (c) I would them rather as substitute good as, they have very similar features, and contraction in demand for one causes growth in demand for other.

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