Imagine that the leaders of a poor nation with a centrally planned economy becom
ID: 1221543 • Letter: I
Question
Imagine that the leaders of a poor nation with a centrally planned economy become willing to try a different economic system, and hire an economist from a rich, market economy nation to advise them The economist recommends a switch to a market economy What will the economist suggest the leaders order their citizens to do? Only one thing can cause movement along a product's demand curve - that is, cause a change in quantity demanded for that product -- and that's a change in that product's price. On the other hand, there are five key variables that can cause a product's demand curve to shift to the left or right - that is. lead to a change in demand. Coca-Cola is experiencing shifts in the U.S. demand curs e for its famous cola soft drink, as the huge post-World War II"Baby Boom" generation has aged beyond their prime soft drink consumption years, and as the smaller generations behind the Baby Boomers have been buying relatively more energy drinks, water, juice, and tea. and relatively less soda than previous generations. What two key variables arc affecting demand for Coca-Cola in the U.S., and in which direction arc these variables shifting the demand curve for Coke?Explanation / Answer
1.
The economist will suggest leaders to order their citizens to do the following:
a. Spend more to create demand. It will create market for overseas players / companies who will be roped in to cater the additional demand.
b. Increase in the credit off take in the area of consumer loans
c. Relinquishing subsidy and adopting high end technology products
d. Change in life style that suits to the product offerings of MNCs
e. Embrace global players with equal interest and passion as shown to the local products
2.
The first variable is the Change in lifestyle trends and dietary habits. The second variable is the presence of attractive substitutes. These two variables are causing change in demand of the soft drink, mentioned in the question. These variables are shifting the demand curve to the left. It means that at one particular price, relatively lesser quantity of the soft drink is demanded.