Question

Imagine you are taking a weekend trip to see your favorite NFL team play. When the game begins, you decide you would like a soda. Going to the nearby vendor, you find a large Coke is $6.50. The extremity of this price surprises you at first, until you remember the law of supply and demand learned in your business course. Describe how supply and demand plays into the price of the Coke.

Answer 1

In this scenario, the law of supply and demand helps explain why the price of the Coke might be higher than expected. It highlights how prices adjust based on market forces to achieve equilibrium between what consumers want and what producers can provide.

Step-by-step explanation:

Supply and demand are fundamental concepts in economics that play a crucial role in determining the price of goods and services, like the large Coke at the NFL game. The law of supply and demand states that the price of a product is influenced by the balance between how much is available (supply) and how much people want to buy (demand).

In the scenario of the large Coke at the NFL game, let's break down how supply and demand affect its price:

1. Demand: The demand for a product refers to the quantity of that product that consumers are willing and able to buy at various price levels. When demand is high, consumers are eager to buy the product even at higher prices, and when demand is low, consumers are less willing to buy at higher prices.

1. Supply: The supply of a product refers to the quantity that producers are willing to produce and sell at different price levels. When supply is high, there's plenty of the product available for sale, and when supply is low, there's a limited amount available.

In the context of the large Coke at the NFL game:

• The demand might be high because many attendees want to enjoy a refreshing beverage while watching the game.

• The supply, however, might be limited due to logistical constraints, like the number of vendors, the volume of beverages they can carry, and the venue's resources.

The interaction between supply and demand determines the equilibrium price, which is the price at which the quantity demanded equals the quantity supplied. If the demand for Cokes at the game is high and the supply is limited, the equilibrium price could be driven up. This means that consumers are willing to pay more for the product due to its perceived value and scarcity. Hence, the $6.50 price for the large Coke might reflect this balance between supply and demand.