Question
You are the manager of a firm that produces and markets a generic type of soft drink in the competitive market. In addition to the
You are the manager of a firm that produces and markets a generic type of soft drink in the competitive market. In addition to the large number of generic products in your market, you also compete against major brands such as Coca Cola and Pepsi. Suppose that due to successful lobbying efforts of sugar producers in the United States, Congress is going to levy a $0.50 tariff (tax on imports) on all imported raw-sugar - the primary input for your product. In addition, Coca-Cola and Pepsi plan to launch an aggressive advertising campaign designed to persuade consumers that branded products are superior to generic soft drinks.
Use supply and demand graphs to show the impact that these events will have on the equilibrium price and quantity of generic soft drinks. Be sure to label your graphs properly and explain any shifts or movements in the graph and why they are happening.
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