Question

You are the manager of Coca-Cola and are facing the effect of a research (published in 2004) that reports that consuming high fructose corn syrup (HFCS) is associated with promoting obesity. Consider the number of news reports and the number of other research papers on this topic that have been published since 2004. This issue is relevant to you because HFCS is the sweetener used in soft drink manufacturing. Then, you are to:

1.1 Define the own price elasticity of demand.

1.2 Write out a loglinear demand equation for Coca-Cola that includes the appropriate demand shifters. Based on economic theory, attach the appropriate sign to the coefficient on each right-hand side variable.

1.3 Given the number of news reports and other research papers that focus on the positive relation between HFCS and obesity, explain how this is represented by the demand equation for Coca-Cola.

1.4 Use economic theory to explain the meaning of the coefficient on each explanatory variable.

Answer 1

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