A PROJECT REPORT ON DEMAND, SUPPLY & ELASTICITY OF COCA COLA SUBMITTED BY MUHAMMAD IFTIKHAR UNDER THE GUIDANCE OF SIR

R ABDUL REHMAN

INDEX INTRODUCTION DEMAND ANLYSIS DETERMINANTS OF DEMAND SHIFT IN DEMAND CURVE SUPPLY ANALYSIS DETERMINANTS OF SUPPLY SHIFT IN SUPPLY CURVE ELASTICITY ANALYSIS DETERMINANTS OF ELASTICITY PRICE ELASTICITY INCOME ELASTICITY CROSS PRICE ELASTICITY CONCLUSION OBJECTIVE To analyse the demand of coca cola. To analyse the supply of coca cola. To know the elasticity of the product. Scope To know the behavior of consumer when the price of a product increases o r decreases. To analyze the change in demand due to some forces in the market.

INTRODUCTION Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending ma chines internationally. The Coca-Cola Company claims that the beverage is sold i n more than 200 countries. It is produced by The Coca-Cola Company in Atlanta, G eorgia, and is often referred to simply as Coke (a registered trademark of The C oca-Cola Company in the United States since March 27, 1944). Originally intended

as a patent medicine when it was invented in the late 19th century by John Pemb erton, Coca-Cola was bought out by businessman Asa Griggs Candler, whose marketi ng tactics led Coke to its dominance of the world soft-drink market throughout t he 20th century. Coca-Cola originated as a soda fountain beverage in 1886 selling for five cents a glass. Early growth was impressive, but it was only when a strong bottling syst em developed that Coca-Cola became the world-famous brand it is today. As a part of its drive to enhance the quality, availability, and image of Coca-C ola products, The Coca-Cola Company established a new Company in Pakistan in 199 6, by the name of Coca-Cola Beverages Pakistan Limited (CCBPL or Company). CCBPL is It has a rbaijan, % shares a part of Coca-Cola ecek which is fifth largest KO bottler in the World. presence in ten countries including Turkey, Kazakhstan, Kyrgyzstan, Aze Jordan, Iraq, Turkmenistan, Tajikistan, Syria, and Pakistan. CCI has 48 of CCBPL with Management Control.

CCBL started the process of acquiring and investing in locally franchised bottli ng operations. This process was completed in 2006 and, thereafter, all manufactu ring and selling rights of Coca-Cola products are now with CCBPL. CCBPL has 6 plants and 13 warehouses throughout the country and serves a populat ion of more than 170 million with a production capacity of 111 million physical cases. CCBPL is a significant player in the growth of Pakistans economy since it is one of the countrys top foreign direct investments in FMCG (Fast Moving Consum er Goods) business and is one of the major tax paying beverages companies of Pak istan. Our Vision To become a market leader in ready to drink segment while adding best-in-class v alue to all stakeholders. Our Mission Coca-Cola Pakistan exists to refresh the consumers, inspire moments of optimism through our brands and actions as well as benefit all stakeholders, which we wil l do with highest social responsibility and with uncompromising commitment towar ds quality of our products and integrity in our operations

DEMAND ANALYSIS DEMAND CURVES Demand curve refers to the quantity of the good that a customer is willing to b uy and able to purchase over a period of time, at a certain price is known as th e quantity demanded of that good. LAW OF DEMAND: It is normally depicted as an inverse relation of quantity demanded and price; t he higher the price of the product, the less the consumer will demand From the figure we can say that when the price of product increases demand decre ases & vice versa, when the price was P1 quantity demanded was Q1,but when the p rice increases to P2 then quantity decreases to Q2.

FACTORS AFFECTING DEMAND Price of relative goods: Demand for coca cola is also influenced by the change in price of relative goods.

In case of coca cola there are number of substitute goods available in the marke t, we have Pepsi, Miranda, limca, spirit, etc. now if the price of coca cola inc reases from Rs 12 to Rs 20 whereas the price of other aerated drinks remain the same then the demand for coca cola will fall down. c INCOME OF THE CONSUMER There is a direct relationship between income of consumer and demand. Now coca c ola being a normal good, if theres an increase in income, the demand will increas e and vice versa. TASTE AND PREFERENCES Taste and preferences of the consumers also influence the demand to greater exte nt. In case of coca cola, if there are hard core consumers who prefer the taste of coca cola, even if the price of coca cola increases, the demand will remain t he same. But if the consumers have no taste or preference of coca cola, then if the price increases the demand decreases. GOVERNMENT POLICIES As the study shows, there was a steep reduction in the demand of coca cola when the pesticides were found in few samples of coca cola. As a result consumer was shifting from coca cola to other natural drinks so therefore the demand for coca cola decreased. TIME Time is an important factor that affects the demand of coca cola e.g. the demand for coca cola goes up during festive seasons and during summers AGE GROUP OF THE POPULATION This product is meant for the children, adults and also for the old people so th e age groups are not much affected the demand of the product so demand remain sa me and by the increase in the population, the demand of the product also increas es.

SHIFT IN DEMAND CURVES SHIFT IN DEMAND CURVE refers to the change in demand due to change in factors ot her than price. Shift can be of 2 types1) Upward shift 2) Downward shift UPWARD SHIFTWhen the demand for product increases, price being constant, due to change in ot her factors e.g. Increase in income. If theres an increase in the income of consumers in the future, then theres a poss ibility that the consumer will shift from local drinks in the market to coca col a.

From this figure we can see that when the income of the consumer increase in the future then the demand for coca cola increases. DOWNWARD SHIFTWhen the demand for the product decreases at same price.eg the demand for coca c ola reduces when people found that there was pesticides found in few samples of coca cola.

SUPPLY ANALYSIS SUPPLY: LAW OF SUPPLY: It states that if the price of a product increases, quantity supply will increas e as the supplier will be willing to supply more to earn more profit. The law shows that there is a positive relationship between price and quantity s upply.

AS SHOWN IN THE FIGURE WHEN THE PRICE OF THE PRODUCT WAS P1 then the quantity su pply is Q1, whereas if the price increases to P2 the quantity supply also increa se to Q2. This show as the prices increases the producers are willing to supply more to earn more profit. In case of coca cola this holds true as the price of coca cola increases there w ill be increase in supply upto a certain level as there are other constrain like easy availability of closed substitute. In the long run if the producer continuously increases the price of coca cola th en the demand for coca cola will fall down because of various substitutes availa ble in the market. DETERMINANTS OF SUPPLY: PRICE: As stated in the law of supply, the price is positively related with quantity su pplied for coca cola, in short run if there is an increase in the price of coca cola, the producers will be willing to produce more of the product. STATE OF TECHNOLOGY: Due to change in the state of technology in the production process, the cost of production will reduce; as a result supplier will be able to supply more at sam e price NUMBER OF CONSUMER: In the case of coca cola there are large number of consumer, as a result the su pplier are willing to supply more to cater the needs for the large number of cus tomer. PRICE OF INPUTS: Includes labour cost, machinery etc. if there is no scarcity in the supply of t hese factors so the cost for these factors will reduce as a result the producer is willing to supply more products at same price.

SHIFT IN SUPPLY CURVE: Shift in supply curve means change in quantity supplied due to others factors wh ile price remains the same. Upward shift. Downward shift. UPWARD SHIFT: Upward shift takes place when the supplier is able to supply at less at a same p rice. E.g. decrease in the supply of sugar due to increase in price and excessive expo rts of sugar results in decrease in production of coca cola.

DOWNWARD Downward e. e.g. due uppliers

SHIFT: shift takes place when the suppliers are willing to supply at same pric to improvement in technology the cost of production decreases and the s are willing to supply more at the same price.

ELASTICITY ANALYSIS Elasticity of demand The elasticity of demand for a commodity is the rate at which quantity changes a s the price changes. Price Elasticity=(% Change in Qty Demanded)/(% Change in Price) Price elasticity is found to be relatively elastic. This means if there is small change in price lead to the big change in quantity demanded. In this case the elasticity for demand is said to more than one(Ed > 1). From the figure we can see when the price of coca cola was p,the quantity demand was Q, when the price increases to P then the quantity demanded to Q. Therefore w e can say that coca cola is elastic in nature and its elasticity for demand is m ore than 1.(Ed>1) DETERMINANTS OF DEMAND ELASTICITY Availability of substitute: In the case of coca cola substitutes are easily available in the market. The mar ket is already flooded with many aerated drinks. Example: pepsi, LMN, mirianda, thumbs up, etc. So even if there is a increase in the price of coca cola, the consumers will shi ft their consumption from coca cola to aerated drinks because of easy availabili ty of related substitutes. TIME: The demand for coca cola is always related to a time factor. This implies that e lasticity of demand varies with the length of time period. In case of long run e lasticity of demand is elastic (because the period is long enough for the people to shift their taste and preference) and in case of the short run the demand re main inelastic. INCOME LEVEL: The demand for coca cola is elastic for middle income group. The middle income g roup is sensitive to the change in price. Therefore if there is an increase in p rice of coca cola, the demand in the middle income group will decrease. PROPORTION OF INCOME SPENDS ON THE GOODS: Coca cola is that product which is meant for the youngsters. In the long run the

demand is relatively inelastic because even in the long run if there is a incre ase in price of coca cola even the hard core coca cola drinker will shift their preference because of the constrain in their pocket money whereas in short run the demand is inelastic.

INCOME ELASTICITY If the income rises by 20% then the demand will rise by 10% the curve is positiv ely sloped means that elasticity of Income is >0 and <1. (When the average income was Rs. 10,000 and demand was 100)

CROSS ELASTICITY OF DEMAND It is ratio of proportionate change in quantity demanded of Y to a given proport ionate change in the price of the relative commodity X. C_E=(Proportionate Change in the Qty Demanded Y)/(Proportionate change in the Pr ice of X) TYPES OF CROSS ELASTICITTY OF DEMAND: POSITIVE: When goods are substitute of each other then the cross elasticity of demand is p ositive. E.g. if the price of coca cola increases, this will lead to increase in the demand for other aerated drinks. In the figure given below, the horizontal axis represents demand for other aerated drinks whereas on vertical axis we meas ure price of coca cola. If the price of coca cola increases from Rs 5 to Rs 6 th en the demand for coca cola will increase from 40 to 50 units.

INCOME ELASTICITY OF DEMAND: It shows the way in which consumers purchase any good as a result of change in h is income. I_e=(% Change in Demand)/(% Change in Income) As there is a positive relationship between incomes of the consumer and quantity demanded for coca cola, so we can say that coca cola is a normal good.

DETERMINANTS OF INCOME ELASTICITY DEMAND Level of income If the income of the consumer is more than the quantity demanded for coca cola w ill be more and vice versa. Time period Time period take the concept of marginal propensity to consume. If the consumers have high income they have more propensities to consume, hence the demand for c oca cola increases and vice versa. Necessities versus Luxuries It is harder to find substitutes for necessities so quantity demanded will chan ge less. Availability of Close Substitutes If there are close substitutes, buyers will move away from more expensive items and demand will be elastic. Definition of the Market The more broadly we define an item, the more possible substitutes and the more elastic the demand. Relative Size of Purchase

Purchases which are a very small portion of total expenditure tend to be more in elastic, because consumers are not worried about the extra expenditure. CONCLUSION: Since our product coca cola is elastic in nature therefore if there is a slight increase in the price of the product, there is a tremendous change demand of the product because of the number of the substitutes available in the market.