llars. While this graph includes neither long-term debt nor shareholder payments, it does indicate a noticeable jump in marginal costs of production in the last few years. This is closely paralleled by an increase in revenues, indicative of previous price increases.Regardless of the cause, let's look at the consequences of this price increase driven by Mama Coke... While a few consumers are die-hard Coke or Pepsi drinkers, some us easily become indifferent once faced with a grocer's aisle filled with refreshment possibilities. Since Coke and Pepsi can be considered substitutes for each other, the Law of Demand tells us that, holding other factors constant, I will buy the one that costs less. Therefore, Coke is willing to sacrifice a certain number of sales to Pepsi or other soft-drink manufacturers by betting on the greater revenues brought in with the price increase.As Coke's market price increases from P to P', quantity demanded is decreased by some amount from Q to Q'. This is shown as a movement down the supply curve from point a to point b. For CCE economists to determine whether an increase in price will be profitable, they would verify P'*Q' * P*Q. This would require statistics on the exact consumer demand for their products. Figure 2: Generalized Supply and Demand Equilibrium for Coke productsCoca-Cola Enterprises has a fairly elastic supply because production equipment and technology needed to produce an additional unit are already included in the corporation's assets and therefore the marginal cost of that unit is low.Coke claims that they are attempting to force their products to become a "superior good" by increasing consumer cost while simultaneously releasing a new advertising campaign. In an economic sense this means that when consumer income rises, the demand for Coke will rise as well. Whether this scheme will succeed or not is yet to be determined; however, Pepsi Co., the number two producer of soft drinks, i...
