Effect on Demand for Coke as a Result of a fall in the Price of Pepsi Essay

Effect on Demand for Coke as a Result of a fall in the Price of Pepsi - Essay Example There is a vice versa effect on the demand for the good whereby the demand decreases as a result of an increase in the price of the good. There are certain factors that affect the demand for a good or a service. There is the effect on the demand for the good and services as a result of the level of income of the consumer. The consumer can demand more goods with a given level of income when the prices of the goods fall. With the same level of income, the consumer demands fewer goods and services if the price of the goods is increased (Hildenbrand, 2014). There is also the effect of demand for goods and services due to the substitution of the goods. The demand for a good and service falls if the price of the substitute good falls since the consumers turn to the cheaper one. The consumers aim at saving and hence prefer the cheaper goods than the expensive substitutes hence affecting the demand for the two goods both negatively and positively. Consumers use different goods to satisfy the ir needs. There are particular goods that can be used to satisfy the same need of a consumer regardless being of different forms. There is usually a rise in the level of demand of one good if the price of the other good rises and the other one falls. An example of such goods is the Coke and the Pepsi product in the market (Hildenbrand, 2014). These products satisfy the same need of the consumers since they are all soft drinks and they can all be used to quench thirst. This serving of the same purpose by the coke and the Pepsi where the coke can be used instead of Pepsi and Pepsi can be used instead of coke to satisfy the same need makes them perfect substitutes. The coke and the Pepsi products being perfect substitutes can have their demands affected differently by changes in their prices. A change of the price of one good would affect the demand for the other good.